--- title: IMAX Corporation Reports Fourth Quarter And Full Year 2013 Financial Results publisher: "IMAX" description: "HIGHLIGHTS - Robust performance in Q4 leads to adjusted EPS of $0.44, 91% growth over same period last year, drives full year adjusted EPS to $0.81 - Highest global box office quarter ever for IMAX of $244 million, brings full year 2013 box office to $727 million - IMAX has record year for signings" canonical: "https://www.imax.com/pr/imax-corporation-reports-fourth-quarter-and-full-year-2013" date: 2014-02-20 last_updated: 2014-02-20 --- IMAX Corporation Reports Fourth Quarter And Full Year 2013 Financial Results ============================================================================ Thu, Feb 20, 2014 **HIGHLIGHTS** **\- Robust performance in Q4 leads to adjusted EPS of $0.44, 91% growth over same period last year, drives full year adjusted EPS to $0.81** **\- Highest global box office quarter ever for IMAX of $244 million, brings full year 2013 box office to $727 million** **\- IMAX has record year for signings with 119 signings in Q4 and 277 in the full year, double that of 2012** **\- IMAX expands backlog to historical high of 384 new commercial theatres, a 45% increase year-over-year** NEW YORK, Feb. 20, 2014/PRNewswire/ -- **IMAX Corporation(NYSE:IMAX; TSX:IMX)**today reported robust fourth quarter 2013 financial results driven by the combination of strong installations as well as its highest grossing quarterly global box office ever. The Company reported revenues for the fourth quarter 2013 of $105.1 million, adjusted EBITDA as calculated in accordance with the Company's credit facility of $52.2 million, adjusted net income of $30.8 million, or $0.44per diluted share, and reported net income of $27.8 million, or $0.40per diluted share. The Company also reported a fourth quarter per screen average of $366,300. (Logo: [http://photos.prnewswire.com/prnh/20111107/MM01969LOGO](http://photos.prnewswire.com/prnh/20111107/MM01969LOGO)) Full year 2013 revenues were $287.9 million, adjusted EBITDA as calculated in accordance with the Company's credit facility was $113.2 million, adjusted net income was $55.7 million, or $0.81per diluted share, and reported net income was $44.1 million, or $0.64per diluted share. For reconciliations of adjusted net income to reported net income and for the definition of adjusted EBITDA and free cash flow, please see the tables at the end of this press release. The Company also reported a 2013 per screen average of $1.15 million. With the exception of 2010, when the Company's per screen average was much higher driven by Avatar, the Company's per screen averages over the past 5 years have been in a range of approximately $1.1 to $1.2 million. "IMAXfired on all cylinders in the fourth quarter, with an exceptional number of installations and signings, as well as the highest grossing box office in the Company's history," said IMAXCEO, Richard L. Gelfond. "Breakout performances by films such as _Gravity, Hobbit,_and _Stalingrad_internationally, exemplify the power and differentiation of the IMAXformat." Gelfond continued, "The strong fourth quarter drove over 90% growth in our EBITDA compared to the same period last year, resulting in margin expansion and strong operating leverage for the full year. Overall, 2013 was a very exciting and productive year at IMAXas we effectively streamlined costs, expanded the network, signed a record number of deals and continued to execute on the film front." **Network Growth Update** In the fourth quarter of 2013, the Company signed contracts for 119 theatre systems and installed 58 theatre systems, of which 4 were upgrades of existing theatre locations, bringing the full year total installations to 112 new theatre systems across 23 countries.  "With our footprint now spanning 57 countries, IMAXis more global than ever before," added Gelfond.  "Moving forward, we are focused on managing all aspects of our business to ensure that we take full advantage of attractive movie-going trends unique to each local market and that we secure IMAX'sposition as the world's premium cinematic experience. Our record level of signings in 2013 will drive ongoing network growth, and we are optimistic about what the future holds." The total IMAX® theatre network consisted of 837 systems as of December 31, 2013, of which 701 were in commercial multiplexes.  IMAXsigned contracts for 277 theatres in 2013, across 31 countries, resulting in 407 theatre systems in backlog as of December 31, 2013, compared to 276 theatre systems in backlog as of December 31, 2012.  For a breakdown of theatre system signings, installations, network and backlog by type, please see the end of this press release. **Fourth-Quarter Segment Results** * Revenue from sales and sales-type leases was $32.6 millionin the fourth quarter of 2013, compared to $20.2 millionin the fourth quarter of 2012, primarily reflecting the installation of 24 full, new theatre systems under sales and sales-type lease arrangements in the most recent fourth quarter, compared to the 14 in the fourth quarter of 2012.  In addition there were 4 digital system upgrades in existing locations in the fourth quarter of 2013, compared to 3 upgrades in the fourth quarter of 2012. * Revenue from joint revenue-sharing arrangements was $24.5 millionin the quarter, compared to $17.0 millionin the prior-year period.  During the quarter, the Company installed 30 new theatres under joint revenue-sharing arrangements, compared to 29 in the year ago period.  The Company had 382 theatres operating under joint revenue-sharing arrangements as of December 31, 2013, as compared to 316 theatres one year prior. * Production and IMAX DMR® (Digital Re-Mastering) revenues were $28.6 millionin the fourth quarter of 2013, compared to $19.2 millionin the fourth quarter of 2012.  Gross box office from DMR titles was $244.5 millionin the fourth quarter of 2013, compared to $152.0 millionin the prior-year period.  The average global DMR box office per screen in the fourth quarter of 2013 was $366,300compared to $264,400in the prior-year period. **Conference Call** The Company will host a conference call today at 8:30 AM ETto discuss its fourth quarter and full year 2013 financial results. To access the call via telephone, interested parties in the US and Canadashould dial (800) 820-0231 approximately 5 to 10 minutes before the call begins.  International callers should dial (416) 640-5926. The conference ID for the call is 9729185. 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 9729185**.** **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'snetwork 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 Dec. 31, 2013, there were 837 IMAXtheatres (701 commercial multiplexes, 19 commercial destinations and 117 institutions) in 57 countries. IMAX®, IMAX® 3D, IMAX DMR®, Experience It In IMAX®, An IMAX 3D Experience®, The IMAX Experience®, IMAX Is Believing® and IMAXnXos® 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, 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 Corporationtogether with its wholly-owned 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, 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; 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; the Company's largest customer accounting for a significant portion of the Company's revenue and backlog; 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 the Company's implementation of a new enterprise resource planning system; the failure to convert theater system backlog into revenue; risks related to the Company's dependence on a sole supplier for its analog film; 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'smost recent Annual Report on Form 10-K._ For additional information please contact: **_Investors:_** **IMAX Corporation, New York** **Teri Loxam** 212-821-0100 tloxam@imax.com **_Business Media:_** Sloane & Company, New York Whit Clay 212-446-1864 wclay@sloanepr.com **_Media:_** **IMAX Corporation, New York** **Ann Sommerlath** **212-821-0155** asommerlath@imax.com **_Entertainment Media:_** Principal Communications Group, Los Angeles Melissa Zuckerman/Paul Pflug 323-658-1555 melissa@pcommgroup.com paul@pcommgroup.com **Additional Information** **Signings and Installations** Dec. 31, 2013 **Three Months** **Twelve Months** **Ended Dec. 31,** **Ended Dec. 31,** **Theatre Signings:** **2013** **2012** **2013** **2012** Full new sales and sales-type lease arrangements 18 11 56 43 New joint revenue sharing arrangements 98 17 190 78 **Total new theatres** **116** **28** **246** **121** Upgrades of IMAX theatre systems 3 10 31 (1) 21 (2) **Total Theatre Signings** **119** **38** **277** **142** **Three Months** **Twelve Months** **Ended Dec. 31,** **Ended Dec. 31,** **Theatre Installations:** **2013** **2012** **2013** **2012** Full new sales and sales-type lease arrangements 24 14 47 (3) 47 New joint revenue sharing arrangements 30 29 65 60 **Total new theatres** **54** **43** **112** (3) **107** Upgrades of IMAX theatre systems 4 3 21 (1) 18 **Total Theatre Installations** **58** **46** **133** **125** **As of Dec. 31,** **Theatre Backlog:** **2013** **2012** New sales and sales-type lease arrangements 125 128 New joint revenue sharing arrangements 259 137 **Total new theatres** **384** **265** Upgrades of IMAX theatre systems 23 11 **Total Theatres in Backlog** **407** (4) **276** (5) **As of Dec. 31,** **Theatre Network:** **2013** **2012** Commercial Multiplex Theatres: Sales and sales-type lease arrangements 319 282 Joint revenue sharing arrangements 382 316 **Total Commercial Multiplex Theatres** **701** **598** Commercial Destination Theatres 19 19 Institutional Theatres 117 114 **Total IMAX Theatre Network** **837** **731** \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (1) Includes upgrades to xenon-based digital systems under short-term operating lease arrangements (10 signings, 10 installations). (2) Includes 3 IMAX theaters acquired from another existing customer that has been operating under a joint revenue sharing arrangement. These theaters were purchased from the Company under a sales arrangement. (3) Includes the following items: (i) one new xenon-based digital system under a short-term operating lease arrangement; (ii) one theater system which has increased the Company's institutional theater network; and (iii) one IMAX Private Theater (the first of its kind in the IMAX theater network).  (4) Includes 23 upgrades to a digital theater system, in an existing IMAX theater location (3 xenon and 20 laser, of which 4 are under joint revenue sharing arrangements). (5) Includes 11 upgrades to a digital theater system, in an existing IMAX theater location (6 xenon and 5 laser). **Additional Information (continued)** **_2013 DMR Films:_**   In 2013, 38 films were converted through the IMAX DMR process and released to theaters in the IMAXnetwork by film studios as compared to 35 films in 2012. These films were: * _The Grandmaster: The_ IMAX_Experience_ (Jet Tone Films and Sil-Metropole Organization, January 2013, Chinaonly); * _Hansel & Gretel: Witch Hunters: An_ IMAX_3D Experience_ (Paramount Pictures, January 2013); * _Top Gun: An_ IMAX_3D Experience_ (Paramount Pictures, February 2013); * _Journey to the West: Conquering the Demons: An_ IMAX_3D Experience_ (Bingo Movie Development Ltd, February 2013, Chinaonly); * _A Good Day to Die Hard: The_ IMAX_Experience_ (Twentieth Century Fox, February 2013); * _Jack the Giant Slayer: An_ IMAX_3D Experience_ (Warner Bros. Pictures, March 2013); * _Oz: The Great and Powerful: An_ IMAX_3D Experience_ (Walt Disney Pictures, March 2013); * _G.I. Joe: Retaliation: An_ IMAX_3D Experience_ (Paramount Pictures, March 2013); * _Dragon Ball Z: Battle of the Gods: An_ IMAX_3D Experience_ (Toei Animation Company, March 2013, Japanonly); * _Jurassic Park: An_ IMAX_3D Experience_(Universal Pictures, April 2013); * _Oblivion: The_ IMAX_Experience_ (Universal Pictures, April 2013); * _Iron Man 3: An_ IMAX_3D Experience_ (Walt Disney Pictures, May 2013); * _Star Trek: Into Darkness: An_ IMAX_3D Experience_ (Paramount Pictures, May 2013); * _Fast & Furious 6: The_ IMAX_Experience_ (Universal Pictures, May 2013, select international markets); * _After Earth: The_ IMAX_Experience_ (Columbia Pictures, May 2013); * _Man of Steel: The_ IMAX_Experience_ (Warner Bros. Pictures, June 2013); * _World War Z: An_ IMAX_3D Experience_ (Paramount Pictures, June 2013, select international markets); * _Despicable Me 2: An_ IMAX_3D Experience_ (Universal Pictures, July 2013, select international markets); * _White House Down: The_ IMAX_Experience_(Sony Pictures, July 2013, select international markets); * _Man of Tai Chi: The_ IMAX_Experience_ (China Film Group, Wanda Group, Village Roadshow, July 2013, Chinaonly); * _Lone Ranger: The_ IMAX_Experience_ (Walt Disney Pictures, July 2013, select international markets); * _Pacific Rim: An_ IMAX_3D Experience_ (Warner Bros. Pictures, July 2013); * _Elysium: The_ IMAX_Experience_ (Sony Pictures, August 2013); * _The Mortal Instruments: City of Bones: The_ IMAX_Experience_ (Sony Pictures, August 2013); * _Riddick Sequel: The_ IMAX_Experience_ (Universal Pictures, September 2013); * _The Wizard of Oz:_ _An_ IMAX3D_Experience_(Picturehouse, September 2013); * _Young Detective Dee: Riseof the Sea Dragon: An_ IMAX_3D Experience_ (Huayi Bros., September 2013, Chinaonly); * _Metallica Through the Never: An_ IMAX3D_Experience_(Warner Bros. Pictures, September 2013); * _Gravity: An_ IMAX_3D Experience_ (Warner Bros. Pictures, October 2013); * _Stalingrad: An_ IMAX_3D Experience_ (AR Films, October 2013, Russiaand the CIS only); * _Captain Phillips: The_ IMAX_Experience_ (Sony Pictures, October 2013); * _The Young and Prodigious T.S. Spivet: An_ IMAX_3D Experience_ (Epithète Films., October 2013, Franceonly); * _Thor: The Dark World: An_ IMAX_3D Experience_ (Walt Disney Pictures, October 2013, select international markets); * _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_ IMAX_3D Experience_ (Warner Bros. Pictures, December 2013); * _Dhoom 3: The_ IMAX_Experience_(Yash Raj Films, December 2013, Indiaonly); and * _Police Story: An_ IMAX_3D Experience_ (China Vision, December 2013, Chinaonly). **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** **Year Ended** **Ended December 31,** **Ended December 31,** **2013** **2012\*** **2013** **2012\*** **Revenues** Equipment and product sales $ 38,014 $ 22,405 $ 78,663 $ 78,161 Services 42,463 33,936 139,464 135,071 Rentals 22,511 18,356 61,293 61,268 Finance income 2,063 1,986 8,142 7,523 Other \- 732 375 732 105,051 77,415 287,937 282,755 **Costs and expenses applicable to revenues** Equipment and product sales 16,956 9,811 37,517 37,538 Services 15,483 16,741 68,844 70,570 Rentals 5,286 8,434 16,973 21,402 Other \- \- \- \- 37,725 34,986 123,334 129,510 **Gross margin** **67,326** 42,429 **164,603** 153,245 Selling, general and administrative expenses 23,305 22,529 82,669 81,560 (including share-based compensation expense of $3.2 million and $11.9 million for the three months and year ended December 31, 2013, respectively (2012 - expense of $2.8 million and $13.1 million, respectively)) Research and development 3,504 3,788 14,771 11,411 Amortization of intangibles 472 174 1,618 706 Receivable provisions, net of recoveries 166 (305) 445 524 Impairment of available-for-sale investment \- \- \- 150 **Income from operations** 39,879 16,243 65,100 58,894 Interest income 16 12 55 85 Interest expense (338) 686 (1,345) (689) **Income from continuing operations before income taxes** **39,557** 16,941 **63,810** 58,290 Provision for income taxes (9,927) (3,594) (16,629) (15,079) Loss from equity-accounted investments (1,759) (324) (2,757) (1,362) **Income from continuing operations**  27,871 13,023 44,424 41,849 Net loss from discontinued operations (42) (140) (309) (512) **Net Income** **$** 27,829 $ 12,883 $ 44,115 $ 41,337 **Net income per share - Basic:** Net income per share from continuing operations $ 0.41 $ 0.20 $ 0.66 $ 0.64 Net loss per share from discontinued operations \- \- \- (0.01) $ 0.41 $ 0.20 $ 0.66 $ 0.63 **Net income per share - Diluted:** Net income per share from continuing operations $ 0.40 $ 0.19 $ 0.64 $ 0.62 Net loss per share from discontinued operations \- \- \- (0.01) $ 0.40 $ 0.19 $ 0.64 $ 0.61 Weighted average number of shares outstanding (000's): Basic _67,696_ 66,264 _67,151_ 65,854 Fully Diluted _69,334_ 68,281 _68,961_ 67,933 Additional Disclosure: Depreciation and amortization(1) $ 8,145 $ 8,084 $ 37,172 $ 32,788 (1) Includes $0.1 million and $0.5 million of amortization of deferred financing costs charged to interest expense for the three months and year ended December 31, 2013 (2012 - less than $0.1 million and $0.2 million respectively). \* Includes a reclass of the Company's owned and operated Nyack theater from continuing operations to discontinued operations. **IMAX CORPORATION** **CONSOLIDATED BALANCE SHEETS** **In accordance with United States Generally Accepted Accounting Principles** _(In thousands of U.S. dollars)_ **As at December 31,** **2013** **2012** **Assets** Cash and cash equivalents $ 29,546 $ 21,336 Accounts receivable, net of allowance for doubtful accounts of $887 (December 31, 2012 — $1,564) 73,074 42,007 Financing receivables  107,110 94,193 Inventories  9,825 15,794 Prepaid expenses 3,602 3,833 Film assets  7,076 3,737 Property, plant and equipment  132,847 113,610 Other assets  27,034 23,963 Deferred income taxes 24,259 36,461 Goodwill 39,027 39,027 Other intangible assets  27,745 27,911 **Total assets** **$** **481,145** **$** **421,872** **Liabilities** Bank indebtedness  $ \- $ 11,000 Accounts payable 19,396 15,144 Accrued and other liabilities  65,232 68,695 Deferred revenue 76,932 73,954 **Total liabilities** **161,560** **168,793** **Commitments and contingencies** **Shareholders' equity** Capital stock common shares — no par value. Authorized — unlimited number. Issued and outstanding — 67,841,233 (December 31, 2012 — 66,482,425) 327,313 313,744 Other equity 36,452 28,892 Deficit (43,051) (87,166) Accumulated other comprehensive loss (1,129) (2,391) **Total shareholders' equity** **319,585** **253,079** **Total liabilities and shareholders' equity** **$** **481,145** **$** **421,872** **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,** **2013** **2012\*** **Cash provided by (used in):** **Operating Activities** Net income $ 44,115 $ 41,337 Net loss from discontinued operations 309 512 Adjustments to reconcile net income to cash from operations: Depreciation and amortization 37,172 32,788 Write-downs, net of recoveries 1,336 1,607 Change in deferred income taxes 12,899 14,724 Stock and other non-cash compensation 12,685 14,220 Unrealized foreign currency exchange loss (gain) 1,183 (329) Gain on curtailment of postretirement benefits (2,185) \- Loss from equity-accounted investments 2,757 1,362 Investment in film assets (20,935) (16,817) Changes in other non-cash operating assets and liabilities (33,755) (15,262) Net cash used in operating activities from discontinued operations (548) (512) **Net cash provided by operating activities** **55,033** **73,630** **Investing Activities** Purchase of property, plant and equipment (13,016) (6,055) Investment in joint revenue sharing equipment (22,775) (23,257) Investment in new business ventures (4,000) (381) Acquisition of other intangible assets (2,486) (5,826) **Net cash used in investing activities** **(42,277)** **(35,519)** **Financing Activities** Increase in bank indebtedness **12,000** 9,917 Repayment of bank indebtedness **(23,000)** (54,000) Common shares issued - stock options exercised 8,970 8,920 Proceeds from disgorgement of stock sale profits \- 314 Credit Facility amendment fees paid (2,151) \- Share issuance expenses (202) \- **Net cash used in financing activities** **(4,383)** **(34,849)** Effects of exchange rate changes on cash (163) (64) **Increase in cash and cash equivalents during year** **8,210** **3,198** **Cash and cash equivalents, beginning of year** **21,336** **18,138** **Cash and cash equivalents, end of year** **$** **29,546** **$** **21,336** \*   Includes a reclass of the Company's owned and operated Nyack theater from continuing operations to discontinued operations. **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** **Year Ended** **Ended December 31,** **Ended December 31,** **2013** **2012(\*)** **2013** **2012(\*)** **Revenue** **IMAX Theater Systems** IMAX Systems Sales and sales-type leases $ 32,623 $ 20,237 $ 65,944 $ 69,988 Ongoing rent, fees, and finance income 4,134 4,105 14,245 13,417 Other 3,838 3,802 11,182 13,019 40,595 28,144 91,371 96,424 Theater system maintenance 8,134 7,751 31,978 28,629 Joint revenue sharing arrangements 24,458 17,049 64,130 57,526 **Film** Production and IMAX DMR 28,642 19,245 83,496 78,050 Film distribution and post-production 3,222 5,226 16,962 22,126 31,864 24,471 100,458 100,176 **Total** **$** 105,051 $ 77,415 $ 287,937 $ 282,755 **Gross margins** **IMAX Theater Systems** IMAX systems(1) Sales and sales-type leases $ 19,262 $ 11,715 $ 35,652 $ 36,974 Ongoing rent, fees, and finance income 3,630 4,055 13,388 13,271 Other (273) 398 102 1,057 22,619 16,168 49,142 51,302 Theater system maintenance 2,664 2,848 12,096 10,970 Joint revenue sharing arrangements(1) 17,769 8,968 44,565 37,308 **Film** Production and IMAX DMR(1) 23,344 13,641 56,088 49,355 Film distribution and post-production 930 804 2,712 4,310 24,274 14,445 58,800 53,665 **Total** **$** 67,326 $ 42,429 $ 164,603 $ 153,245 (1) IMAX systems include marketing and commission costs of $1.5 million and $2.5 million for the three and twelve months ended December 31, 2013, respectively (2012 — $0.6 million and $2.7 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $1.6 million and $3.6 million for the three and twelve months ended December 31, 2013, respectively (2012 — $1.3 million and $3.4 million, respectively). Production and DMR segment margins include marketing costs of $1.1 million and $4.2 million for the three and twelve months ended December 31, 2013, respectively (2012 — $1.1 million and $3.3 million, respectively). Distribution segment margins include marketing costs of $0.2 million and $0.4 million for the three and twelve months ended December 31, 2013, respectively (2012 — $0.3 million and $1.5 million, respectively). \* Includes a reclass of the Company's owned and operated Nyack theater from continuing operations to discontinued operations. **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 Statesgenerally 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 (net of any related tax impact) on its net income. Management uses these measures to review operating performance on a comparable basis from period to period. However, these non-GAAP measures may not be comparable to similarly titled amounts reported by other companies. Adjusted EBITDA, adjusted net income 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. The Company will also be required to maintain minimum EBITDA (as defined in the Credit Agreement) of $80.0 millionon December 31, 2013, which increases to $90.0 millionon December 31, 2014, and $100.0 millionon December 31, 2015. The Company must also maintain a Maximum Total Leverage Ratio (as defined in the Credit Agreement) of 2.25:1 on December 31, 2013, which requirement decreases to 2.0:1 on December 31, 2014, and 1.75:1 on December 31, 2015. The ratio of total debt to EBITDA was nil:1 as at December 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 $nil. EBITDA is calculated as follows: **For the** **For the** **3 months ended** **12 months ended** **December 31, 2013** **December 31, 2013** **_(In thousands of U.S. Dollars)_** Net income $ 27,829 $ 44,115 Add: Loss from equity-accounted investments 1,759 2,757 Provision for income taxes(1) 9,906 16,470 Interest expense, net of interest income 321 1,290 Depreciation and amortization, including film asset amortization 8,011 36,685 Write-downs, net of recoveries and receivable provisions 1,057 1,336 Stock and other non-cash compensation 3,337 12,685 Gain on curtailment of postretirement benefits \- (2,185) **Adjusted EBITDA** **$** 52,220 $ 113,153 (1) Includes a tax recovery in discontinued operations of less than $0.1 million and $0.2 million for the three and twelve months ended December 31, 2013, respectively. **IMAX CORPORATION ****OTHER INFORMATION **_(in thousands of U.S. dollars)_ **_Adjusted Net Income and Adjusted Diluted Per Share Calculations – Quarter Ended December 31, 2013vs. 2012:_** The Company reported net income of $27.8 million or $0.41 per basic share and $0.40per diluted share for the fourth quarter of 2013 as compared to $12.9 million or $0.20 per basic share and $0.19per diluted share for the fourth quarter of 2012. Net income for the quarter includes a $3.2 million charge or $0.04 per diluted share (2012 – $2.9 million or $0.04per diluted share) for stock-based compensation. Adjusted net income, which consists of net income excluding the impact of stock-based compensation and the related tax impact, was $30.8 millionor $0.44 per diluted share in the fourth quarter of 2013 as compared to adjusted net income of $15.7 millionor $0.23per diluted share for the fourth 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** **December 31, 2013** **December 31, 2012** **Net Income** **Diluted EPS** **Net Income** **Diluted EPS** Reported $ 27,829 $ 0.40 $ 12,883 $ 0.19 Adjustments: Stock-based compensation 3,156 0.04 2,861 0.04 Tax impact on item listed above (185) \- (74) \- Adjusted $ 30,800 $ 0.44 $ 15,670 $ 0.23 Weighted average diluted shares outstanding **69,334** **68,281** **_Adjusted Net Income and Adjusted Diluted Per Share Calculations – Year Ended December 31, 2013vs. 2012:_** The Company reported net income of $44.1 million or $0.66 per basic share and $0.64 per diluted share for the year ended December 31, 2013 as compared to net income of $41.3 million or $0.63 per basic share and $0.61per diluted share for the year ended December 31, 2012. Net income for the year ended December 31, 2013 includes an $11.9 million charge or $0.17 per diluted share (2012 — $13.1 million or $0.19 per diluted share) for stock-based compensation. Adjusted net income, which consists of net income excluding the impact of stock-based compensation and the related tax impact, was $55.7 millionor $0.81per diluted share for the year ended December 31, 2013as compared to adjusted net income of $54.3 millionor $0.80per diluted share for the year ended December 31, 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: **Year Ended** **Year Ended** **December 31, 2013** **December 31, 2012** **Net Income** **Diluted EPS** **Net Income** **Diluted EPS** Net income $ 44,115 $ 0.64 $ 41,337 $ 0.61 Add: Stock-based compensation 11,928 0.17 13,113 0.19 Tax impact on items listed above (344) \- (160) \- Adjusted net income $ 55,699 $ 0.81 $ 54,290 $ 0.80 Weighted average diluted shares outstanding **68,961** **67,933** **_Free Cash Flow:_** Free cash flow is defined as cash provided by operating activities minus cash used in investing activities (from the consolidated statements of cash flows). Cash provided by operating activities consist of net income, plus depreciation and amortization, plus the change in deferred income taxes, plus other non-cash items, plus changes in working capital, less investment in film assets, plus other changes in operating assets and liabilities. Cash used in investing activities includes capital expenditures, acquisitions and other cash used in investing activities. Management views free cash flow, a non-GAAP measure, as a measure of the Company's after-tax cash flow available to reduce debt, add to cash balances, and fund other financing activities. A reconciliation of cash provided by operating activities to free cash flow is presented in the table below: **For the** **For the** **3 months ended** **12 months ended** **December 31, 2013** **December 31, 2013** **_(In thousands of U.S. Dollars)_** Net cash provided by operating activities $ 22,058 $ 55,033 Net cash (used in) investing activities (15,435) (42,277) Free cash flow $ 6,623 $ 12,756 SOURCE IMAX Corporation