--- title: IMAX Corporation Reports First Quarter 2013 Financial Results publisher: "IMAX" description: "HIGHLIGHTS - Company Reports First Quarter 2013 Revenues of $49.9 million - Q1 2013 Adjusted Earnings Per Diluted Share of $0.08 - Summer Blockbuster Season Kicks off This Week with International Release of Iron Man 3 NEW YORK , April 25, 2013 /PRNewswire/ -- IMAX Corporation (NYSE:IMAX; TSX:IMX)" canonical: "https://www.imax.com/pr/imax-corporation-reports-first-quarter-2013-financial-results" date: 2013-04-25 last_updated: 2013-04-25 --- IMAX Corporation Reports First Quarter 2013 Financial Results ============================================================= Thu, Apr 25, 2013 **HIGHLIGHTS** **\- Company Reports First Quarter 2013 Revenues of $49.9 million** **\- Q1 2013 Adjusted Earnings Per Diluted Share of $0.08** **\- Summer Blockbuster Season Kicks off This Week with International Release of Iron Man 3** NEW YORK, April 25, 2013/PRNewswire/ -- **IMAX Corporation(NYSE:IMAX; TSX:IMX)**today reported first quarter 2013 revenues of $49.9 million, adjusted EBITDA as calculated in accordance with the Company's credit facility of $13.9 million, adjusted net income of $5.6 million, or $0.08per diluted share, and reported net income of $2.9 million, or $0.04per diluted share. (Logo: [http://photos.prnewswire.com/prnh/20111107/MM01969LOGO](http://photos.prnewswire.com/prnh/20111107/MM01969LOGO)) "In the first quarter, we continued to execute against our three main Company priorities for the year – Penetration, Differentiation, and Scale," said IMAXChief Executive Officer Richard L. Gelfond. "We expect these to be key drivers of our long-term growth, while supporting our results in the near-term, and we are excited about the promising upcoming lineup of films in IMAX, particularly in the second quarter." **Network Growth Update** The total IMAX® theatre network consisted of 738 systems as of March 31, 2013, of which 606 were in commercial multiplexes.  There were 283 theatre systems in backlog as of March 31, 2013, compared to 261 theatre systems in backlog as of March 31, 2012.  For a breakdown of theatre system signings, installations, network and backlog by type, please see the end of this press release. In the first quarter of 2013, the Company signed contracts for 25 theatre systems, of which 17 were in new theatre locations and 8 were additional signings for laser systems and conversion of some of the Company's film theatres to digital systems in existing theatre locations.  In the quarter the Company installed 17 theatre systems, of which 10 were in new theatre locations.  "We are very pleased that we continue to penetrate different countries around the world, strengthening our presence in some and building strong theatres in new markets to catalyze future growth in others," Gelfond continued.  "Our one-of-a-kind, end-to-end entertainment solution is driving demand from exhibitor and studio partners from around the world, who have seen the value of being in the IMAXbusiness.  We remain optimistic as our growth opportunity in underpenetrated international regions, combined with our ability to program each of those markets individually, continues to position IMAXas a unique player in the global entertainment industry." **First-Quarter Segment Results** * Revenue from sales and sales-type leases was $9.8 millionin the first quarter of 2013, compared to $12.9 millionin the first quarter of 2012, primarily reflecting the installation of six full, new theatre systems under sales and sales-type lease arrangements in the most recent first quarter, compared to eight full, new theatre systems in the first quarter of 2012.  The Company also installed five digital system upgrades under sales or sales-type lease arrangements in the first quarter of 2013, compared to 10 upgrades in the first quarter of 2012, and two digital systems under short-term operating lease arrangements. * Revenue from joint revenue-sharing arrangements was $9.4 million, compared to $11.7 millionin the prior-year period.  During the quarter, the Company installed four new theatres under joint revenue-sharing arrangements, compared to eight in the year-ago period.  The Company had 319 theatres operating under joint revenue-sharing arrangements as of March 31, 2013, as compared to 265 theatres one year prior. * Production and IMAX DMR® (Digital Re-Mastering) revenues were $14.4 millionin the first quarter of 2013, compared to $13.8 millionin the first quarter of 2012.  Gross box office from DMR titles was $128.7 millionin the first quarter of 2013, compared to $121.7 millionin the prior-year period.  The average global DMR box office per screen in the first quarter of 2013 was $212,900, compared to $247,600in the prior-year period. "Looking ahead, the heart of the summer box office season kicks into gear this week including the release of the IMAX® 3D version of _Iron Man 3_, followed by _Star Trek: Into Darkness, Man of Steel_and an international only release of _Fast & Furious 6_, providing a strong foundation for our full portfolio of films this year," Gelfond concluded. "We have secured many key tentpole films for the remainder of 2013, as well as 2014 and beyond, including Christopher Nolan's _Interstellar_and Michael Bay's _Transformers 4_, both of which will be captured with IMAXcameras, demonstrating the ongoing desire of studios and filmmakers to leverage the IMAXplatform to bring audiences the most immersive entertainment experiences that they cannot get anywhere else." **Conference Call **The Company will host a conference call today at 8:30 AM ETto discuss its first quarter 2013 financial results.  To access the call via telephone, interested parties should dial (800) 820-0231 approximately 5 to 10 minutes before it begins.  International callers should dial (416) 640-5926.  The participant passcode for the call is 7114021.  This call is also being webcast by Thomson Financialand can be accessed on the 'Investor Relations' section of [www.imax.com](http://www.imax.com/).  A replay of the call will be available via webcast on the 'Investor Relations' section of [www.imax.com](http://www.imax.com/)or via telephone by dialing (888) 203-1112 (US and Canada) or (647) 436-0148 (international). The Conference ID for the telephone replay is 7114021. **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 IMAXtheatres 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. IMAXis headquartered in New York, Torontoand Los Angeles, with offices in London, Tokyo, Shanghaiand Beijing.  As of Mar. 31, 2013, there were 738 IMAXtheatres (606 commercial multiplexes, 19 commercial destinations and 113 institutions) in 53 countries. IMAX®, IMAX® 3D, IMAX DMR®, Experience It In IMAX®, An IMAX 3D Experience®, The IMAX Experience® and IMAX Is Believing® are trademarks of IMAX Corporation. More information about the Company can be found at [www.imax.com](http://www.imax.com/). You may also connect with IMAXon Facebook([www.facebook.com/imax](http://www.facebook.com/imax)), Twitter ([www.twitter.com/imax](http://www.twitter.com/imax)) and YouTube([www.youtube.com/imaxmovies](http://www.youtube.com/imaxmovies)). _This press release contains forward looking statements that are based on IMAXmanagement's assumptions and existing information and involve certain risks and uncertainties which could cause actual results to differ materially from future results expressed or implied by such forward looking statements. Important factors that could affect these statements include, but are not limited to, general economic, market or business conditions; the opportunities (or lack thereof) that may be presented to and pursued by the Company; the performance of IMAX DMR films; competitive actions by other companies; conditions in the in-home and out-of-home entertainment industries; the signing of theater system agreements; changes in laws or regulations; conditions, changes and developments in the commercial exhibition industry; the failure to convert theater system backlog into revenue; 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 Statesand Canada; risks related to the Company's growth and operations in China; the failure to respond to change and advancements in digital technology; risks related to the acquisition of AMC Entertainment Holdings, Inc.by Dalian Wanda Group Co., Ltd.; risks related to new business initiatives; the potential impact of increased competition in the markets within which the Company operates; risks related to the Company's inability to protect the Company's intellectual property; risks related to Eastman Kodakbankruptcy and the possibility of constrained film supply; risks related to the Company's implementation of a new enterprise resource planning system; risks related to the Company's prior restatements and the related litigation; and other factors, many of which are beyond the control of the Company. These factors, 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** **Teri Loxam/Blaire Lomasky** 212-821-0100 [tloxam@imax.com](mailto:tloxam@imax.com) [blomasky@imax.com](mailto:blomasky@imax.com) **_Business Media:_** Sloane & Company, New York Whit Clay 212-446-1864 [wclay@sloanepr.com](mailto:wclay@sloanepr.com) **_Media:_** **IMAX Corporation, New York** **Ann Sommerlath** **212-821-0155** [asommerlath@imax.com](mailto:asommerlath@imax.com) **_Entertainment Media:_** Principal Communications Group, Los Angeles Melissa Zuckerman/Paul Pflug 323-658-1555 [melissa@pcommgroup.com](mailto:melissa@pcommgroup.com) [paul@pcommgroup.com](mailto:paul@pcommgroup.com) **Additional Information** **_Theatre Network Details:_** **Three Months** **Ended March 31,** **Theatre Signings:** **2013** **2012** Full new sales and sales-type lease arrangements 14 (1) 18 New joint revenue sharing arrangements 3 5 **Total new theatres** **17** **23** Upgrades of IMAX theatre systems 8 (2)(3) \- **Total Theatre Signings** **25** **23** **Three Months** **Ended March 31,** **Theatre Installations:** **2013** **2012** Full new sales and sales-type lease arrangements 6 8 New joint revenue sharing arrangements 4 8 **Total new theatres** **10** **16** Upgrades of IMAX theatre systems 7 (2) 10 **Total Theatre Installations** **17** **26** **As of March 31,** **Theatre Backlog:** **2013** **2012** New sales and sales-type lease arrangements 135 144 New joint revenue sharing arrangements 136 116 **Total new theatres** **271** **260** Upgrades of IMAX theatre systems 12 (2)(3) 1 **Total Theatres in Backlog** **283** (4) **261** (4) **As of March 31,** **Theatre Network:** **2013** **2012** Commercial Multiplex Theatres: Sales and sales-type lease arrangements 287 245 Joint revenue sharing arrangements 319 265 **Total Commercial Multiplex Theatres** **606** **510** Commercial Destination Theatres 19 20 Institutional Theatres 113 113 **Total IMAX Theatre Network** **738** **643** \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (1) Includes one signing which replaced a theatre under an existing arrangement in backlog. (2) Includes upgrades to xenon-based digital systems under short-term operating lease arrangements (2 signings, 2 installations, 5 in backlog). (3) Includes installation of laser-based digital systems in existing theatre locations (2 signings, 7 in backlog). (4) Reflects the minimum number of theatres arising from signed contracts in backlog. **Additional Information (continued)** **_2013 DMR Films Announced to Date:_**  To date, IMAXhas announced 28 titles to be released in 2013.  The Company released 35 titles in 2012.  The Company remains in discussions with virtually every major studio regarding future titles and expects the total number of titles in 2013 to be similar to that in 2012.  * _The Grandmaster: The_ IMAX_Experience_ (Jet Tone Films and Sil-Metropole Organization, January 2013, Chinaonly); * _Hansel & Gretel: Witch Hunters: An_ IMAX3D _Experience_ (Paramount Pictures, January 2013); * _Journey to the West: Conquering the Demons: An_ IMAX3D_Experience_ (Bingo Movie Development Ltd, February 2013, Chinaonly); * _Top Gun: An_ IMAX3D_Experience_ (Paramount Pictures, February 2013); * _A Good Day to Die Hard: The_ IMAX_Experience_ (Twentieth Century Fox, February 2013); * _Jack the Giant Slayer: An_ IMAX3D_Experience_ (Warner Bros., March 2013); * _Oz: The Great and Powerful: An_ IMAX3D_Experience_ (Walt Disney Pictures, March 2013); * _G.I. Joe: Retaliation: An_ IMAX3D _Experience_ (Paramount Pictures, March 2013); * _Dragon Ball Z: Battle of the Gods: An_ IMAX3D_Experience_ (Toei Animation Company, March 2013, Japanonly); * _Jurassic Park: An_ IMAX3D_Experience_(Universal Pictures, April 2013); * _Oblivion: The_ IMAX_Experience_ (Universal Pictures, April 2013); * _Iron Man 3: An_ IMAX3D _Experience_ (Walt Disney Pictures, May 2013); * _Star Trek: Into Darkness: An_ IMAX3D_Experience_ (Paramount Pictures, May 2013); * _Fast & Furious 6: The_ IMAX_Experience_(Universal, May 2013, international only); * _After Earth: The_ IMAX_Experience_(Sony, May 2013); * _Man of Steel: The_ IMAX_Experience_ (Warner Bros., June 2013); * _Despicable Me 2: An_ IMAX3D _Experience_ (Universal Pictures, July 2013, international only); * _Pacific Rim: An_ IMAX3D_Experience_ (Warner Bros., July 2013); * _300: Riseof an Empire: An_ IMAX3D_Experience_ (Warner Bros., August 2013); * _Riddick Sequel: The_ IMAX_Experience_ (Universal Pictures, September 2013); * _Metallica Through the Never: An_IMAX3D _Experience_(Picturehouse, September 2013); * _Gravity: An_ IMAX3D_Experience_ (Warner Bros., October 2013); * _Stalingrad: An_ IMAX3D_Experience_ (AR Films, October 2013, Russiaand the CIS only ); * _Seventh Son: An_ IMAX3D_Experience_ (Warner Bros., October 2013); * _Ender's Game: The_ IMAX_Experience_ (Lionsgate, November 2013); * _The Hunger Games: Catching Fire: The_ IMAX_Experience_ (Lionsgate, November 2013); * _The Hobbit: The Desolation of Smaug: An_ IMAX3D_Experience_ (Warner Bros., December 2013); and * _Dhoom 3: The_ IMAX_Experience_(Yash Raj Films, 2013, Indiaonly). **IMAX CORPORATION** **CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS** **In accordance with United States Generally Accepted Accounting Principles** _(In thousands of U.S. dollars, except per share amounts)_ **_(Unaudited)_** **Three Months** **Ended March 31,** **2013**  **2012\*** **Revenues** Equipment and product sales $ 10,679 $ 14,379 Services 26,859  27,067 Rentals 9,972  12,470 Finance income 1,984  1,680 Other 375  \- 49,869  55,596 **Costs and expenses applicable to revenues** Equipment and product sales 5,059   9,095 Services 15,318  15,620 Rentals 3,453  4,020 Other \-  \- 23,830  28,735 **Gross margin** 26,039  26,861 Selling, general and administrative expenses 17,476  19,168 (including share-based compensation expense of $2.8 million for the three months ended March 31, 2013 (2012 - $3.8 million)) Research and development 3,634  2,630 Amortization of intangibles 364  176 Receivable provision, net of recoveries \-  451 **Income from operations** 4,565  4,436 Interest income 13  24 Interest expense (345) (526) **Income from continuing operations before income taxes** 4,233  3,934 Provision for income taxes (1,152) (966) Loss from equity-accounted investments (220) (459) **Net income** $ 2,861 $ 2,509 **Net income per share - basic & diluted:** Net income per share – basic & diluted $ 0.04 $ 0.04 Weighted average number of shares outstanding (000's): Basic 66,646  65,402 Fully Diluted 68,690  68,158 Additional Disclosure: Depreciation and amortization $ 8,591 $ 7,466 \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \* Reflects a revision resulting from an adjustment to reflect an unfunded postretirement obligation of the Company. **IMAX CORPORATION** **CONDENSED CONSOLIDATED BALANCE SHEETS** **In accordance with United States Generally Accepted Accounting Principles** _(in thousands of U.S. dollars)_ **As at** **As at** **March 31,** **December 31,** **2013** **2012** (unaudited) **Assets** Cash and cash equivalents $ 15,158 $ 21,336 Accounts receivable, net of allowance for doubtful accounts of $1,564 (December 31, 2012 — $1,564) 48,360 42,007 Financing receivables 96,204 94,193 Inventories 14,452 15,794 Prepaid expenses 4,781 3,833 Film assets 4,427 3,737 Property, plant and equipment 120,764 113,610 Other assets 25,410 23,963 Deferred income taxes 35,654 36,461 Goodwill 39,027 39,027 Other intangible assets 28,101 27,911 **Total assets** **$** **432,338** **$** **421,872** **Liabilities** Bank indebtedness $ 18,000 $ 11,000 Accounts payable 16,155 15,144 Accrued and other liabilities 61,335 68,695 Deferred revenue 76,364 73,954 **Total liabilities** **171,854** **168,793** **Shareholders' equity** Capital stock, common shares — no par value. Authorized — unlimited number. Issued and outstanding — 66,866,076 (December 31, 2012 — 66,482,425) 317,144 313,744 Other equity 30,239 28,892 Deficit (84,305) (87,166) Accumulated other comprehensive loss (2,594) (2,391) Total shareholders' equity **260,484** **253,079** **Total liabilities and shareholders' equity** **$** **432,338** **$** **421,872** **IMAX CORPORATION** **CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS** **In accordance with United States Generally Accepted Accounting Principles** _(In thousands of U.S. dollars)_ **_(Unaudited)_** **Three Months** **Ended March 31,** **2013** **2012\*** **Cash provided by (used in):** **Operating Activities** Net income $ 2,861 $ 2,509 Adjustments to reconcile net income to cash from operations: Depreciation and amortization 8,591 7,466 Write-downs, net of recoveries \- 481 Change in deferred income taxes 904 624 Stock and other non-cash compensation 3,000 4,088 Gain on curtailment of postretirement benefits (2,185) \- Unrealized foreign currency exchange loss (gain) 189 (1,388) Loss on equity-accounted investments 220 459 Investment in film assets (3,866) (3,958) Changes in other non-cash operating assets and liabilities (10,703) 145 Net cash (used in) provided by operating activities (989) 10,426 **Investing Activities** Purchase of property, plant and equipment (3,315) (374) Investment in joint revenue sharing equipment (8,717) (7,088) Investment in new business ventures \- (381) Acquisition of other intangible assets (778) (2,568) Net cash used in investing activities (12,810) (10,411) **Financing Activities** Increase in bank indebtedness 12,000 4,917 Repayment of bank indebtedness (5,000) (5,000) Common shares issued - stock options exercised 2,485 3,488 Credit facility amendment fees paid (1,881) \- Net cash provided by financing activities 7,604 3,405 Effects of exchange rate changes on cash 17 30 **(Decrease) increase in cash and cash equivalents during the period** (6,178) 3,450 **Cash and cash equivalents, beginning of period** 21,336 18,138 **Cash and cash equivalents, end of period** $ 15,158 $ 21,588 **IMAX CORPORATION** **SELECTED FINANCIAL DATA** **In accordance with United States Generally Accepted Accounting Principles** _(in thousands of U.S. dollars)_ The Company has seven reportable segments identified by category of product sold or service provided: IMAX systems; theater system maintenance; joint revenue sharing arrangements; film production and IMAX DMR; film distribution; film post-production; and other. The IMAX systems segment is comprised of the design, manufacture, sale or lease IMAX theater projection system equipment. The theater system maintenance segment consists of the maintenance of IMAX theater projection system equipment in the IMAX theater network. The joint revenue sharing arrangements segment is comprised of the installation IMAX theater projection system equipment to an exhibitor in exchange for a certain percentage of box-office receipts, concession revenue and in some cases a small upfront or initial payment. The film production and IMAX DMR segment is comprised of the production of films and performance of film re-mastering services. The film distribution segment includes the distribution of films for which the Company has distribution rights. The film post-production segment includes the provision of film post-production and film print services. The other segment includes certain IMAX theaters that the Company owns and operates, camera rentals and other miscellaneous items. **Three Months** **Ended March 31,** **2013**  **2012** **Revenue** **Theater Systems** IMAX Systems Sales and sales-type leases $ 9,796 $ 12,865 Ongoing rent, fees, and finance income 2,942  2,793 Other 1,983  2,340 14,721  17,998 Theater system maintenance 7,789  6,847 Joint revenue sharing arrangements 9,376  11,698 **Film** Production and IMAX DMR 14,355  13,838 Film distribution and post-production 3,628  5,215 17,983  19,053 **Total** $ 49,869 $ 55,596 **Gross margins** **Theater Systems** **IMAX systems**(1) Sales and sales-type leases $ 5,284 $ 4,650 Ongoing rent, fees, and finance income 2,907  2,762 Other (349) (457) 7,842  6,955 Theater system maintenance 3,054  2,726 Joint revenue sharing arrangements(1) 6,159  7,937 **Film** Production and IMAX DMR(1) 9,213  7,930 Film distribution and post-production (229)  1,313 8,984  9,243 **Total** $ 26,039 $ 26,861 \_\_\_\_\_\_\_\_\_ (1) IMAX systems include commission costs of $0.3 million for the three months ended March 31, 2013 (2012 — $0.7 million). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $0.2 million for the three months ended March 31, 2013 (2012 — $0.4 million). Production and DMR segment margins include marketing costs of $0.9 million for the three months ended March 31, 2013 (2012 — $0.6 million). Distribution segment margins include marketing costs of $0.1 million for the three months ended March 31, 2013 (2012 — $0.8 million). **IMAX CORPORATION** **OTHER INFORMATION** _(in thousands of U.S. dollars)_ **_Non-GAAP Financial Measures:_** In this release, the Company presents adjusted EBITDA, adjusted net income and adjusted net income per diluted share as supplemental measures of performance of the Company, which are not recognized under United States generally accepted accounting principles ("GAAP"). The Company presents adjusted EBITDA, adjusted net income and adjusted net income per diluted share because it believes that they are important supplemental measures of its comparable controllable operating performance and it wants to ensure that its investors fully understand the impact of its stock-based compensation expense and the related tax impact. Management uses these measures to review operating performance on a comparable basis from period to period. However, these non-GAAP measures may not be comparable to similarly titled amounts reported by other companies. Adjusted EBITDA, adjusted net income and adjusted net income per diluted share should be considered in addition to, and not as a substitute for, net income and other measures of financial performance reported in accordance with GAAP. Adjusted EBITDA is calculated on a basis consistent with the Company's Credit Facility, which refers to Adjusted EBITDA as EBITDA. The Credit Facility provides that the Company will be required to maintain a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of not less than 1.1:1.0. The Company will also be required to maintain minimum EBITDA (as defined in the Credit Agreement) of $70.0 million between closing and December 30, 2013, which requirement increases to $80.0 million on December 31, 2013, $90.0 million on December 31, 2014, and $100.0 million on December 31, 2015. The Company must also maintain a Maximum Total Leverage Ratio (as defined in the Credit Agreement) of 2.5:1.0 between closing and December 30, 2013, which requirement decreases to (i) 2.25:1.0 on December 31, 2013; (ii) 2.00:1:0 on December 31, 2014; and (iii) 1.75:1.0 on December 31, 2015. The ratio of total debt to EBITDA was 0.17:1 as at March 31, 2013, where Total Debt (as defined in the Credit Agreement) is the sum of all obligations evidenced by notes, bonds, debentures or similar instruments and was $18.0 million. EBITDA is calculated as follows: **Three months ended** **Twelve months ended** **March 31, 2013** **March 31, 2013** **_(In thousands of U.S Dollars)_** Net income $ 2,861 $ 41,689 Add: Loss from equity accounted investments 220 1,123 Provision for income taxes 1,152 15,265 Interest expense, net of interest income (1) 331 433 Depreciation and amortization, including film asset amortization 8,493 33,686 Write-downs net of recoveries including asset impairments and receivable provisions \- 1,126 Gain on curtailment of postretirement benefits (2,185) (2,185) Stock and other non-cash compensation 3,000 13,132 $ 13,872 $ 104,269 \_\_\_\_\_\_\_\_\_\_\_\_ (1) Includes $0.1 million of amortization of deferred financing costs charged to interest expense for the three months ended March 31, 2013 (2012 – less than $0.1 million). **IMAX CORPORATION** **OTHER INFORMATION** _(in thousands of U.S. dollars)_ **_Adjusted Net Income and Adjusted Diluted Earnings Per Share Calculations – Quarter Ended March 31, 2013 vs. 2012:_** The Company reported net income of $2.9 million, or $0.04 per basic and diluted share, for the first quarter of 2013, as compared to net income of $2.5 million or $0.04 per basic and diluted share for the first quarter of 2012. Net income for the first quarter of 2013 includes a $2.8 million charge, or $0.04 per diluted share, for stock-based compensation (2012 - $3.8 million or $0.05 per diluted share). Adjusted net income, which consists of net income excluding stock-based compensation expense and the related tax benefit, was $5.6 million, or $0.08 per diluted share, in the first quarter of 2013, as compared to adjusted net income of $6.1 million, or $0.09 per diluted share, for the first quarter of 2012. A reconciliation of net income, the most directly comparable U.S. GAAP measure, to adjusted net income and adjusted net income per diluted share is presented in the table below: **Three Months Ended** **Three Months Ended** **March 31, 2013** **March 31, 2012\*** **Net Income** **Diluted EPS** **Net Income** **Diluted EPS** Reported $ 2,861 $ 0.04 $ 2,509 $ 0.04 Adjustments: Stock-based compensation 2,808 0.04 3,802 0.05 Tax benefit on item listed above (105) \- (200) \- Adjusted $ 5,564 $ 0.08 $ 6,111 $ 0.09 Weighted average diluted shares outstanding 68,690 68,158 **_Free Cash Flow:_** Free cash flow is defined as cash provided by operating activities minus cash used in investing activities (from the consolidated statements of cash flows). Cash provided by operating activities consist of net income, plus depreciation and amortization, plus the change in deferred income taxes, plus other non-cash items, plus changes in working capital, less investment in film assets, plus other changes in operating assets and liabilities. Cash used in investing activities includes capital expenditures, acquisitions and other cash used in investing activities. Management views free cash flow, a non-GAAP measure, as a measure of the Company's after-tax cash flow available to reduce debt, add to cash balances, and fund other financing activities.  A reconciliation of cash provided by operating activities to free cash flow is presented in the table below: **Three Months Ended** **_(In thousands of U.S. Dollars)_** **March 31, 2013** Net cash (used in) operating activities $ (989) Net cash (used in) investing activities  (12,810) Free cash flow $ (13,799) SOURCE IMAX Corporation