--- title: IMAX Corporation Reports Second Quarter 2013 Financial Results publisher: "IMAX" description: "  Click Here for PDF Version HIGHLIGHTS -- Second quarter 2013 revenues increase 17% from prior year period to $82.3 million, driven by recurring revenue -- Network growth and strong per screen averages drive 27% box office growth in Q2 2013 from prior year period -- Strong second quarter signings," canonical: "https://www.imax.com/pr/imax-corporation-reports-second-quarter-2013-financial-results" date: 2013-07-25 last_updated: 2013-07-25 --- IMAX Corporation Reports Second Quarter 2013 Financial Results ============================================================== Thu, Jul 25, 2013 ![](http://www.corporate-ir.net/media_files/priv/CCBN/event_help/icons/md_pdf.gif)  [Click Here for PDF Version](http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTk0NjQzfENoaWxkSUQ9LTF8VHlwZT0z&t=1) **HIGHLIGHTS** **\-- Second quarter 2013 revenues increase 17% from prior year period to $82.3 million, driven by recurring revenue** **\-- Network growth and strong per screen averages drive 27% box office growth in Q2 2013 from prior year period** **\-- Strong second quarter signings, combined with recent CJ CGV and Wanda/AMC deals, position IMAX well for future footprint expansion** NEW YORK, July 25, 2013 /PRNewswire/ **\-- IMAX Corporation** (NYSE:IMAX; TSX:IMX) today reported second quarter 2013 revenues of $82.3 million, adjusted EBITDA as calculated in accordance with the Company's credit facility of $32.2 million, adjusted net income of $15.0 million, or $0.22 per diluted share, and reported net income of $11.8 million, or $0.17 per diluted share.   (Logo:  [http://photos.prnewswire.com/prnh/20111107/MM01969LOGO](http://photos.prnewswire.com/prnh/20111107/MM01969LOGO)) "In the second quarter we remained focused on executing our strategy of expanding the network and delivering solid global box office and per screen performance, which resulted in strong recurring revenue growth," said Richard L. Gelfond, IMAX Chief Executive Officer. "Strategic investments - including our innovative laser projection system - along with some non-recurring items, contributed to higher operating expenses in the quarter." "When you take into account the healthy backlog at the end of the second quarter, along with the substantial signing activity over the past few weeks, including last night's Wanda/AMC announcement, the result is a strong pipeline for continued network expansion over the coming years," Gelfond continued. "We believe that this, together with our world-class brand and our increasing ability to tailor our programming globally, positions the Company well for long-term growth and an exciting future." **Network Growth Update** The total IMAX® theatre network consisted of 767 systems as of June 30, 2013, of which 634 were in commercial multiplexes. There were 284 theatre systems in backlog as of June 30, 2013, compared to 280 theatre systems in backlog as of June 30, 2012.  With the inclusion of the recently announced 35 theatre agreement with CJ CGV as well as the 45 to 130 theatre agreement with Wanda/AMC, the Company's total year-to-date signings are between 140 and 225, depending on whether Wanda/AMC exercises their option for 80 additional theatres under their most recent agreement.  For a breakdown of theatre system signings, installations, network and backlog by type, please see the end of this press release. In the second quarter of 2013, the Company signed contracts for 34 theatre systems, of which 25 were in new theatre locations and 9 were a combination of signings for laser systems and upgrades of certain of the Company's film theatres to digital systems in existing theatre locations.  In the quarter, the Company installed 30 theatre systems, of which 29 were in new theatre locations.  **Second-Quarter Segment Results** * Revenue from sales and sales-type leases was $17.1 million in the second quarter of 2013, compared to $14.9 million in the second quarter of 2012, primarily reflecting the installation of 11 full, new theatre systems under sales and sales-type lease arrangements in the most recent second quarter, the same number of theatre installs the Company booked this period last year, and the recognition of revenue related to previously installed digital upgrades.  The Company also installed 1 digital system upgrade under a sales arrangement in the second quarter of 2013, compared to zero such upgrades in the second quarter of 2012. * Revenue from joint revenue-sharing arrangements was $18.3 million in the quarter, compared to $15.6 million in the prior-year period.  During the quarter, the Company installed 18 new theatres under joint revenue-sharing arrangements, compared to 9 in the year-ago period.  The Company had 336 theatres operating under joint revenue-sharing arrangements as of June 30, 2013, as compared to 274 theatres one year prior. * Production and IMAX DMR® (Digital Re-Mastering) revenues were $26.0 million in the second quarter of 2013, compared to $19.7 million in the second quarter of 2012.  Gross box office from DMR titles was $219.7 million in the second quarter of 2013, compared to $173.5 million in the prior-year period.  The average global DMR box office per screen in the second quarter of 2013 was $353,300, compared to $341,900 in the prior-year period. **Conference Call** The Company will host a conference call today at 8:30 AM ET to discuss its second 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 **1118760**.  This call is also being webcast by Thomson Financial and 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 **1118760**. **About IMAX Corporation**  IMAX, an innovator in entertainment technology, combines proprietary software, architecture and equipment to create experiences that take you beyond the edge of your seat to a world you've never imagined. Top filmmakers and studios are utilizing IMAX theatres to connect with audiences in extraordinary ways, and, as such, IMAX's network is among the most important and successful theatrical distribution platforms for major event films around the globe. IMAX is headquartered in New York, Toronto and Los Angeles, with offices in London, Tokyo, Shanghai and Beijing.  As of June 30, 2013, there were 767 IMAX theatres (634 commercial multiplexes, 19 commercial destinations and 114 institutions) in 54 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 IMAX on 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 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, 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 States and 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 Kodak bankruptcy 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 212-821-0100 [tloxam@imax.com](mailto:tloxam@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:_** **Signings and Installations** June 30, 2013 **Three Months** **Ended June 30,** **Theatre Signings:** **2013** **2012** Full new sales and sales-type lease arrangements 18 (1) 10 New joint revenue sharing arrangements 7 28   **Total new theatres** **25** **38** Upgrades of IMAX theatre systems 9 (2)(3) 2 **Total Theatre Signings** **34** **40** **Three Months** **Ended June 30,** **Theatre Installations:** **2013** **2012** Full new sales and sales-type lease arrangements 11 11 New joint revenue sharing arrangements 18 9   **Total new theatres** **29** **20** Upgrades of IMAX theatre systems 1 \- **Total Theatre Installations** **30** **20** **As of June 30,** **Theatre Backlog:** **2013** **2012** New sales and sales-type lease arrangements 140 144 New joint revenue sharing arrangements 124 135   **Total new theatres** **264** **279** Upgrades of IMAX theatre systems 20 1 **Total Theatres in Backlog** **284** **280** **As of June 30,** **Theatre Network:** **2013** **2012** Commercial Multiplex Theatres: Sales and sales-type lease arrangements 298 255 Joint revenue sharing arrangements 336 274 **Total Commercial Multiplex Theatres** **634** **529** Commercial Destination Theatres 19 20 Institutional Theatres 114 114 **Total IMAX Theatre Network** **767** **663** (1) Includes one signing which replaced a theater under an existing arrangement in backlog. (2) Includes five signings for laser-based digital systems in existing theater locations. (3) Includes three signings for xenon-based digital systems under short-term operating lease arrangements. **Additional Information (continued)** **_2013 DMR Films Announced to Date:_**   To date, IMAX has announced 34 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, China only); * _Hansel & Gretel: Witch Hunters: An_ IMAX 3D _Experience_ (Paramount Pictures, January 2013); * _Journey to the West: Conquering the Demons: An_ IMAX 3D _Experience_ (Bingo Movie Development Ltd, February 2013, China only); * _Top Gun: An_ IMAX 3D _Experience_ (Paramount Pictures, February 2013); * _A Good Day to Die Hard: The_ IMAX _Experience_ (Twentieth Century Fox, February 2013); * _Jack the Giant Slayer: An_ IMAX 3D _Experience_ (Warner Bros., 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, Japan only); * _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, May 2013, international only); * _After Earth: The_ IMAX _Experience_ (Sony, May 2013); * _Man of Steel: The_ IMAX _Experience_ (Warner Bros., June 2013); * _World War Z: An_ IMAX 3D _Experience_ (Paramount Pictures, June 2013, international only); * _Despicable Me 2: An_ IMAX 3D _Experience_ (Universal Pictures, July 2013, international only); * _White House Down: The IMAX Experience (Colombia Pictures and Sony Pictures, July 2013; international only);_ * _Man of Tai Chi: The IMAX Experience (China Film Group, Wanda Group and Village Roadshow Pictures, July 2013; China only);_ * _Pacific Rim: An_ IMAX 3D _Experience_ (Warner Bros., July 2013); * _The Lone Ranger : The_ IMAX _Experience_ (Walt Disney Pictures, August 2013; international only); * _Elysium: The_ IMAX _Experience_ (Sony, August 2013); * _Riddick Sequel: The_ IMAX _Experience_ (Universal Pictures, September 2013); * _Mortal Instruments: City of Bones: The_ IMAX _Experience_ (Sony, August 2013; domestic only); * _The Wizard of Oz: An_ IMAX 3D _Experience_ (Warner Bros., September 2013; domestic only); * _Metallica Through the Never: An_ IMAX 3D _Experience_ (Picturehouse, September 2013); * _Stalingrad: An_ IMAX 3D _Experience_ (AR Films, October 2013; Russia and the CIS only ); * _Gravity: An_ IMAX 3D _Experience_ (Warner Bros., October 2013); * _The Young and Prodigious: T.S. Spivet: An_ IMAX 3D _Experience_ (Gaumont, October 2013; France only); * _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., December 2013); and * _Dhoom 3: The_ IMAX _Experience_ (Yash Raj Films, 2013, India only). **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** **Six Months** **Ended June 30,** **Ended June 30,** **2013** **2012\*** **2013** **2012\*** **Revenues** Equipment and product sales $ 20,347 $ 17,050 $ 31,026 $ 31,429 Services 42,099 34,929 68,958 61,996 Rentals 17,823 16,429 27,795 28,899 Finance income 2,024 1,802 4,008 3,482 Other \- \- 375 \- 82,293 70,210 132,162 125,806 **Costs and expenses applicable to revenues** Equipment and product sales 11,416 7,980 16,475 17,075 Services 23,126 18,651 38,444 34,271 Rentals 4,175 4,746 7,628 8,766 Other \- \- \- \- 38,717 31,377 62,547 60,112 **Gross margin** 43,576 38,833 69,615 65,694 Selling, general and administrative expenses 22,110 20,431 39,586 39,599 (including share-based compensation expense of $3.1 million and $5.9 million for the three and six months ended June 30, 2013, respectively (2012 - expense of $3.7  million and $7.5 million, respectively)) Research and development 3,659 2,465 7,293 5,095 Amortization of intangibles 373 190 737 366 Receivable provisions, net of recoveries 55 137 55 588 Impairment of available-for-sale investment \- 150 \- 150 **Income from operations** 17,379 15,460 21,944 19,896 Interest income 12 27 25 51 Interest expense (348) (476) (693) (1,002) **Income from operations before income taxes** 17,043 15,011 21,276 18,945 Provision for income taxes (4,793) (3,732) (5,945) (4,698) Loss from equity-accounted investments (434) (245) (654) (704) **Net income** $ 11,816 $ 11,034 $ 14,677 $ 13,543 **Net income per share - basic and diluted:** Net income per share - basic $ 0.18 $ 0.17 $ 0.22 $ 0.21 Net income per share - diluted $ 0.17 $ 0.16 $ 0.21 $ 0.20 **Weighted average number of shares outstanding (000's):** Basic 66,952 65,822 66,799 65,612 Fully Diluted 68,893 68,374 68,769 68,190 Additional Disclosure: Depreciation and amortization $ 11,610 $ 9,200 $ 20,201 $ 16,666 \* 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)_ **_(Unaudited)_** **June 30,** **December 31,** **2013** **2012** **Assets** Cash and cash equivalents $ 20,774 $ 21,336 Accounts receivable, net of allowance for doubtful accounts of $1,495 (December 31, 2012 — $1,564) 62,712 42,007 Financing receivables 100,088 94,193 Inventories 12,770 15,794 Prepaid expenses 4,572 3,833 Film assets 6,005 3,737 Property, plant and equipment 121,859 113,610 Other assets 26,126 23,963 Deferred income taxes 32,050 36,461 Goodwill 39,027 39,027 Other intangible assets 27,787 27,911 **Total assets** **$** **453,770** $ **421,872** **Liabilities** Bank indebtedness $ 18,000 $ 11,000 Accounts payable 18,356 15,144 Accrued and other liabilities 66,372 68,695 Deferred revenue 73,916 73,954 **Total liabilities** **176,644** **168,793** **Commitments, contingencies and guarantees** **Shareholders' equity** Capital stock (note 15) common shares — no par value. Authorized — unlimited number.     Issued and outstanding — 67,062,106 (December 31, 2012 — 66,482,425) 320,102 313,744 Other equity 32,160 28,892 Deficit (72,489) (87,166) Accumulated other comprehensive loss (2,647) (2,391) **Total shareholders' equity** **277,126** **253,079** **Total liabilities and shareholders' equity** **$** **453,770** $ **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)_** **Six Months** **Ended June 30,** **2013** **2012\*** **Cash provided by (used in):** **Operating Activities** Net income $ 14,677 $ 13,543 Adjustments to reconcile net income to cash from operations: Depreciation and amortization 20,201 16,666 Write-downs, net of recoveries 55 919 Change in deferred income taxes 4,481 3,578 Stock and other non-cash compensation 6,317 8,062 Gain on curtailment of postretirement benefits (2,185) \- Unrealized foreign currency exchange loss (gain) 874 (720) Loss from equity-accounted investments 654 704 Investment in film assets (12,033) (11,141) Changes in other non-cash operating assets and liabilities (25,021) (11,769) Net cash provided by operating activities 8,040 19,842 **Investing Activities** Purchase of property, plant and equipment (5,054) (1,775) Investment in joint revenue sharing equipment (10,393) (13,024) Investment in new business ventures (1,000) (381) Acquisition of other intangible assets (1,142) (4,223) Net cash used in investing activities (17,589) (19,403) **Financing Activities** Increase in bank indebtedness 12,000 9,917 Repayment of bank indebtedness (5,000) (10,000) Common shares issued - stock options exercised 3,992 5,039 Credit facility amendment fees paid (2,088) \- Net cash provided by financing activities 8,904 4,956 Effects of exchange rate changes on cash 83 47 **(Decrease) increase in cash and cash equivalents during the period** (562) 5,442 **Cash and cash equivalents, beginning of period** 21,336 18,138 **Cash and cash equivalents, end of period** $ 20,774 $ 23,580 **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 June 30,** **Six Months Ended June 30,** **2013** **2012** **2013** **2012** **Revenue** **Theater Systems** IMAX Systems Sales and sales-type leases(2) $ 17,105 $ 14,948 $ 26,902 $ 27,814 Ongoing rent, fees, and finance income 3,687 3,099 6,628 5,891 Other 4,149 3,057 6,132 5,397 24,941 21,104 39,662 39,102 Theater system maintenance 7,952 6,989 15,741 13,836 Joint revenue sharing arrangements 18,336 15,593 27,712 27,291 **Film** Production and IMAX DMR 25,952 19,744 40,307 33,582 Film distribution and post-production 5,112 6,780 8,740 11,995 31,064 26,524 49,047 45,577 **Total** $ 82,293 $ 70,210 $ 132,162 $ 125,806 **Gross margins** **Theater Systems** **IMAX systems**(1) Sales and sales-type leases(2) $ 7,154 $ 8,034 $ 12,462 $ 12,684 Ongoing rent, fees, and finance income 3,575 3,073 6,481 5,835 Other 622 180 273 (277) 11,351 11,287 19,216 18,242 Theater system maintenance 3,160 2,568 6,214 5,294 Joint revenue sharing arrangements(1) 13,507 11,117 19,643 19,054 **Film** Production and IMAX DMR(1) 14,936 12,358 24,149 20,288 Film distribution and post-production 622 1,503 393 2,816 15,558 13,861 24,542 23,104 **Total** $ 43,576 $ 38,833 $ 69,615 $ 65,694 (1) IMAX systems include commission costs of $0.4 million and $0.7 million for the three and six months ended June 30, 2013, respectively (2012 — $0.5 million and $1.2 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $0.9 million and $1.1 million for the three and six months ended June 30, 2013, respectively (2012 — $0.7 million and $1.0 million, respectively). Production and IMAX DMR segment margins include marketing costs of $1.4 million and $2.3 million for the three and six months ended June 30, 2013, respectively (2012 — $1.1 million and $1.7 million, respectively). Distribution segment margins include a marketing cost of less than $0.1 million and an expense of $0.1 million for the three and six months ended June 30, 2013, respectively (2012 — expense of $0.4 million and $1.2 million, respectively). (2) Includes revenue of $3.1 million and a margin loss of $0.3 million in the three and six months ended June 30, 2013, respectively, for 10 theater systems under a digital upgrade arrangement which were previously installed, but revenue recognition was deferred.   **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 share-based compensation 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 September 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 September 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 June 30, 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** **June 30, 2013** **June 30, 2013** **_(In thousands of U.S Dollars)_** Net income $ 11,816 $ 42,472 Add: Loss from equity accounted investments 434 1,312 Provision for income taxes 4,793 16,327 Interest expense, net of interest income(1) 336 320 Depreciation and amortization, including film asset amortization 11,483 36,012 Write-downs net of recoveries including asset impairments and receivable provisions 55 743 Stock and other non-cash compensation 3,317 12,474 Gain on curtailment of postretirement benefits \- (2,185) $ 32,235 $ 107,475 (1) Includes $0.1 million and $0.3 million of amortization of deferred financing costs charged to interest expense for the three and twelve months ended June 30, 2013, respectively. **IMAX CORPORATION** **OTHER INFORMATION**  _(in thousands of U.S. dollars)_ **_Adjusted Net Income and Adjusted Diluted Per Share Calculations – Quarter Ended June 30, 2013 vs. 2012:_** The Company reported net income of $11.8 million or $0.18 per basic share and $0.17 per diluted share for the second quarter of 2013, as compared to net income of $11.0 million or $0.17 per basic and $0.16 per diluted share for the second quarter of 2012. Net income for the second quarter of 2013 includes a $3.1 million charge, or $0.05 per diluted share, for stock-based compensation (2012 - $3.7 million or $0.06 per diluted share). Adjusted net income, which consists of net income excluding stock-based compensation expense and the related tax benefit, was $15.0 million, or $0.22 per diluted share, in the second quarter of 2013, as compared to adjusted net income of $14.7 million, or $0.22 per diluted share, for the second 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** **June 30, 2013** **June 30, 2012** **Net Income** **Diluted EPS** **Net Income** **Diluted EPS** Reported net income $ 11,816 $ 0.17 $ 11,034 $ 0.16 Adjustments: Stock-based compensation 3,125 0.05 3,694 0.06 Tax benefit of items listed above 31 \- 7 \- Adjusted net income $ 14,972 $ 0.22 $ 14,735 $ 0.22 Weighted average diluted shares outstanding 68,893 68,374 **_Adjusted Net Income and Adjusted Diluted Per Share Calculations – Six Months Ended June 30, 2013 vs. 2012:_** The Company reported net income of $14.7 million or $0.22 per basic share and $0.21 per diluted share for the six months ended June 30, 2013, as compared to net income of $13.5 million or $0.21 per basic and $0.20 per diluted share for the six months ended June 30, 2012. Net income for the six months ended June 30, 2013 includes a $5.9 million charge, or $0.09 per diluted share, for stock-based compensation (2012 – $7.5 million or $0.11 per diluted share). Adjusted net income, which consists of net income excluding stock-based compensation expense and the related tax expense, was $20.5 million, or $0.30 per diluted share, in the six months ended June 30, 2013, as compared to adjusted net income of $20.8 million, or $0.31 per diluted share, for the six months ended June 30, 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: **Six Months** **Six Months** **Ended June 30, 2013** **Ended June 30, 2012** **Net Income** **Diluted EPS** **Net Income** **Diluted EPS** Net income $ 14,677 $ 0.21 $ 13,543 $ 0.20 Add: Stock-based compensation 5,933 0.09 7,496 0.11 Tax expense on items listed above (74) \- (194) \- Adjusted net income $ 20,536 $ 0.30 $ 20,845 $ 0.31 Weighted average diluted shares outstanding 68,769 68,190 **_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: **Six Months Ended** **_(In thousands of U.S. Dollars)_** **June 30, 2013** Net cash provided by operating activities   $ 8,040 Net cash (used in) investing activities  (17,589) Free cash flow $ (9,549) SOURCE IMAX Corporation