--- title: IMAX Corporation Reports Second Quarter 2014 Financial Results publisher: "IMAX" description: "HIGHLIGHTS - Operating leverage drives approximately 15% growth in adjusted net income in the second quarter compared to Q2 2013, contributing to $21.3 million in cash flow from operations in the quarter - IMAX installs 30 new theaters across 13 countries in Q2, including 12 new theaters in China -" canonical: "https://www.imax.com/pr/imax-corporation-reports-second-quarter-2014-financial-results" date: 2014-07-24 last_updated: 2014-07-24 --- IMAX Corporation Reports Second Quarter 2014 Financial Results ============================================================== Thu, Jul 24, 2014 **HIGHLIGHTS** **\- Operating leverage drives approximately 15% growth in adjusted net income in the second quarter compared to Q2 2013, contributing to $21.3 million in cash flow from operations in the quarter** **\- IMAX installs 30 new theaters across 13 countries in Q2, including 12 new theaters in China** **\- Company signs deals for 24 theater systems in the second quarter, bringing backlog to 419 theaters** NEW YORK, July 24, 2014/PRNewswire/ -- **IMAX Corporation(NYSE: IMAX; TSX: IMX)**today reported second quarter 2014 revenues of $79.1 million, adjusted EBITDA as calculated in accordance with the Company's credit facility of $32.8 million, adjusted net income, after non-controlling interest, of $17.2 million, or $0.25per diluted share, and reported net income, after non-controlling interest, of $13.3 million, or $0.19per diluted share.   ![IMAX Logo.](http://photos.prnewswire.com/prnvar/20111107/MM01969LOGO "IMAX Logo.") "During the second quarter, we showed operating leverage, delivering strong growth in net earnings, which translated to operating cash flow growth in the period.  Our bottom line financials reflected expanding margins and continued cost controls," stated Richard L. Gelfond, Chief Executive Officer of IMAX Corporation. "We also made strides in the quarter with respect to key 2014 initiatives, including expanding the network, developing our world-class laser projection system and testing new marketing strategies, which we believe will help further position us to take full advantage of the potentially very strong film slates in 2015 and 2016." **Network Growth Update** The total IMAX® theater network consisted of 868 systems as of June 30, 2014, of which 735 were in commercial multiplexes. There were 419 theaters in backlog as of June 30, 2014, compared to 284 in backlog as of June 30, 2013.  In the second quarter of 2014, the Company signed contracts for 24 theaters, of which 20 were for new locations and 4 were for upgrades.  In the quarter, the Company installed 34 IMAXtheater systems, 30 of which were for new theater locations and 12 of which were installed in China.  For a breakdown of theater system signings, installations, network and backlog by type, please see the end of this press release. "The IMAXnetwork has grown significantly in Chinaover the past several years, from just 9 theaters in 2008 to over 160 today, and just this week we announced another deal for 19 theaters in Chinawith Shanghai Film Company," Gelfond continued.  "Couple this with stellar box office performances from films such as _Transformers 4_, which has become our biggest grossing film ever in China, and I believe it is clear how strong our business and brand have become in China.  It is with this in mind that we announced earlier in the quarter the strategic investment by two Chinese investors for 20% of our IMAX China business, which we believe can help us further grow that business and unlock significant value for our IMAXshareholders." **Second-Quarter Segment Results** * Revenue from sales and sales-type leases was $14.5 millionin the second quarter of 2014, compared to $17.1 millionin the second quarter of 2013, in connection with the installation of 11 full, new theater systems under sales and sales-type lease arrangements in the most recent second quarter, compared to the 11 sales and sales-type theaters the Company installed in the second quarter of 2013.  In addition, there were 4 digital system upgrades, of which two were under a short term operating lease, in existing locations in the second quarter of 2014, compared to one upgrade in the second quarter of 2013. * Revenue from joint revenue-sharing arrangements was $19.4 millionin the quarter, compared to $18.3 millionin the prior-year period.  During the quarter, the Company installed 19 new theaters under joint revenue-sharing arrangements, compared to 18 in the year-ago period.  The Company had 408 theaters operating under joint revenue-sharing arrangements as of June 30, 2014, as compared to 336 theaters one year prior. * Production and IMAX DMR® (Digital Re-Mastering) revenues were $24.1 millionin the second quarter of 2014, compared to $26.0 millionin the second quarter of 2013.  Gross box office from DMR titles was $216.0 millionin the second quarter of 2014, compared to $219.7 millionin the prior-year period.  The average global DMR box office per screen in the second quarter of 2014 was $299,800compared to $353,300in the prior-year period. **Conference Call** The Company will host a conference call today at 8:30 AM ETto discuss its second quarter 2014 financial results.  To access the call via telephone, interested parties in the US and Canadashould dial (800) 524-8950 approximately 5 to 10 minutes before it begins.  International callers should dial (416) 260-0113. The participant passcode for the call is 1883257. 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 **1883257** **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 IMAXtheaters 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 June 30, 2014, there were 868 IMAXtheaters (735 commercial multiplexes, 19 commercial destinations and 114 institutions) in 59 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, 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'smost recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q._ **For additional information please contact:** **_Investors:_** **_Media:_** IMAX Corporation, New York IMAX Corporation, New York Teri Loxam Ann Sommerlath 212-821-0100 212-821-0155 [tloxam@imax.com](mailto:tloxam@imax.com) [asommerlath@imax.com](mailto:asommerlath@imax.com) **_Business Media:_** **_Entertainment Media:_** Sloane & Company, New York Principal Communications Group, Los Angeles Whit Clay Melissa Zuckerman/Paul Pflug 212-446-1864 323-658-1555 [wclay@sloanepr.com](mailto:wclay@sloanepr.com) [melissa@pcommgroup.com](mailto:%7Cmelissa@pcommgroup.com) [paul@pcommgroup.com](mailto:paul@pcommgroup.com) **Additional Information** **Signings and Installations** June 30, 2014 **Three Months** **Ended June 30,** **Theater Signings:** **2014** **2013** Full new sales and sales-type lease arrangements 17 18 (1) New joint revenue sharing arrangements 3 7 **Total new theaters** **20** **25** Upgrades of IMAX theater systems 4 (2)(3) 9 (2)(3) **Total Theater Signings** **24** **34** **Three Months** **Ended June 30,** **Theater Installations:** **2014** **2013** Full new sales and sales-type lease arrangements 11 11 New joint revenue sharing arrangements 19 18 **Total new theaters** **30** **29** Upgrades of IMAX theater systems 4 (3) 1 **Total Theater Installations** **34** **30** **As of June 30,** **Theater Backlog:** **2014** **2013** New sales and sales-type lease arrangements 155 140 New joint revenue sharing arrangements 242 124 **Total new theaters** **397** **264** Upgrades of IMAX theater systems 22 20 **Total Theaters in Backlog** **419** (4) **284** (5) **As of June 30,** **Theater Network:** **2014** **2013** Commercial Multiplex Theaters: Sales and sales-type lease arrangements 327 298 Joint revenue sharing arrangements 408 336 **Total Commercial Multiplex Theaters** **735** **634** Commercial Destination Theaters 19 19 Institutional Theaters 114 114 **Total IMAX Theater Network** **868** **767** (1) Includes one signing which replaced theaters under an existing arrangement in backlog. (2) Includes two signings for the installation of laser-based digital systems in existing theater locations (2013 – five). (3) Includes one signing and two installations of upgrades to xenon-based digital systems under short-term operating lease arrangements (2013 – 3 signings). (4) Includes 22 upgrades to a digital theater system, in existing IMAX theater locations (22 laser, of which 4 are under joint revenue sharing arrangements). (5) Includes 20 upgrades to a digital theater system, in existing IMAX theater locations (8 xenon and 12 laser, of which 3 are under joint revenue sharing arrangements). **Additional Information (continued)** **_2014 DMR Films:_**   To date, IMAXhas announced 26 titles so far to be released in 2014.  The Company released 38 titles in 2013.  The Company remains in discussions with virtually every major studio regarding future titles and expects the total number of titles in 2014 to be similar to that in 2013.  * _Jack Ryan: Shadow Recruit: The_ IMAX_Experience_ (Paramount Pictures, January 2014); * _I, Frankenstein: An_ IMAX_3D Experience_ (Lionsgate, January 2014); * _The Monkey King: The_ IMAX_Experience_ (Global Star Productions, January 2014, Chinaonly); * _Robocop: The_ IMAX_Experience_ (Metro-Goldwyn-Mayer Studios, Inc., February 2014); * _300: Riseof an Empire: An_ IMAX_3D Experience_ (Warner Bros. Pictures, March 2014); * _Need for Speed: An_ IMAX_3D Experience_ (Walt Disney Studios, March 2014, select international markets); * _Divergent: The_ IMAX_Experience_ (Summit Entertainment, March 2014); * _Noah: The_ IMAX_Experience_ (Paramount Pictures, March 2014); * _Captain America: The Winter Soldier: An_ IMAX_3D Experience_ (Marvel Entertainment, April 2014); * _Transcendence: The_ IMAX_Experience_ (Warner Bros. Pictures, April 2014); * _The Amazing Spider-Man 2: An_ IMAX_3D Experience_ (Sony Pictures, May 2014); * _Godzilla: An_ IMAX_3D Experience_ (Warner Bros. Pictures, May 2014); * _Coming Home: The_ IMAX_Experience_ (Le Vision Pictures, May 2014, China Only); * _Maleficent: An_ IMAX_3D Experience_ (Walt Disney Studios, May 2014); * _Edge of Tomorrow: An_ IMAX_3D Experience_ (Warner Bros. Pictures, June 2014); * _How to Train Your Dragon 2: An_ IMAX_3D Experience_ (DreamWorks Animation, June 2014); * _Transformers: Age of Extinction: An_ IMAX_3D Experience_ (Paramount Pictures, June 2014); * _Hercules: An_ IMAX_3D Experience_ (Paramount Pictures, July 2014);  * _Guardians of the Galaxy: An_ IMAX_3D Experience_ (Walt Disney Studios, August 2014); * _Teenage Mutant Ninja Turtles: An_ IMAX_3D Experience_ (Paramount Pictures, August 2014, select international markets);  * _Lucy: The_ IMAX_Experience_ (Universal Pictures, August 2014, select international markets); * _Forest Gump: The_ IMAX_Experience_(Paramount Pictures, September 2014); * _The Equalizer: An_ IMAX_3D Experience_ (Sony Pictures, September 2014); * _Dracula Untold: The_ IMAX_Experience_ (Universal Studios, October 2014); * _Interstellar: The_ IMAX_Experience_ (Paramount Picturesand Warner Bros. Pictures, November 2014); and * _The Hobbit: The Battle of the Five Armies: An_ IMAX_3D Experience_ (Warner Bros. Pictures, December 2014). **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,** **2014** **2013** **2014** **2013** **Revenues** Equipment and product sales $ 19,502 $ 20,347 $ 25,856 $ 31,026 Services 39,742 41,519 68,614 68,175 Rentals 17,841 17,823 28,632 27,795 Finance income 2,060 2,024 4,240 4,008 Other \- \- \- 375 79,145 81,713 127,342 131,379 **Costs and expenses applicable to revenues** Equipment and product sales 9,366 11,416 13,085 16,475 Services 17,180 22,487 31,530 37,451 Rentals 4,805 4,175 8,525 7,628 31,351 38,078 53,140 61,554 **Gross margin** 47,794 43,635 74,202 69,825 Selling, general and administrative expenses 23,498 22,110 44,810 41,771 (including share-based compensation expense of $4.7 million and $7.9 million for the three and six months ended June 30, 2014, respectively (2013- expense of $3.1 million and $5.9 million, respectively)) Gain on curtailment of postretirement benefit plan \- \- \- (2,185) Research and development 3,309 3,659 6,908 7,293 Amortization of intangibles 416 373 818 737 Receivable provisions, net of recoveries 329 55 616 55 Impairment of available-for-sale investment 650 \- 650 \- **Income from operations** 19,592 17,438 20,400 22,154 Interest income 24 12 40 25 Interest expense (268) (348) (534) (693) **Income from operations before income taxes** 19,348 17,102 19,906 21,486 Provision for income taxes (5,407) (4,813) (5,479) (6,016) Loss from equity-accounted investments, net of tax (162) (434) (424) (654) **Income from continuing operations** 13,779 11,855 14,003 14,816 Net (loss) income from discontinued operations, net of tax \- (39) 355 (139) **Net income** 13,779 11,816 14,358 14,677 Less: Net income attributable to non-controlling interests (472) \- (472) \- **Net income attributable to Common Shareholders** $ 13,307 $ 11,816 $ 13,886 $ 14,677 **Net income per share - basic:** Net income per share from continuing operations $ 0.19 (1) $ 0.18 $ 0.20 (1) $ 0.22 Net income per share from discontinued operations \- \- 0.01 \- $ 0.19 (1) $ 0.18 $ 0.21 (1) $ 0.22 **Net income per share - diluted:** Net income per share from continuing operations $ 0.19 (1) $ 0.17 $ 0.19 (1) $ 0.21 Net income per share from discontinued operations \- \- 0.01 \- $ 0.19 (1) $ 0.17 $ 0.20 (1) $ 0.21 **Weighted average number of shares outstanding (000's):** Basic 68,228 66,952 68,068 66,799 Fully diluted 69,452 68,893 69,448 68,769 **Additional Disclosure:** Depreciation and amortization(2) $ 8,390 $ 11,610 $ 15,945 $ 20,201 (1)  Includes impact of $0.1 million of accretion charges associated with redeemable common stock. (2)  Includes $0.1 million and $0.3 million of amortization of deferred financing costs charged to interest expense for the three and six months ended June 30, 2014, respectively (2013 - $0.1 million and $0.2 million, respectively). **IMAX CORPORATION** **CONDENSED CONSOLIDATED BALANCE SHEETS** **In accordance with United States Generally Accepted Accounting Principles** _(in thousands of U.S. dollars)_ **_(Unaudited)_** **As at** **As at** **June 30,** **December 31,** **2014** **2013** **Assets** Cash and cash equivalents $ 75,087 $ 29,546 Accounts receivable, net of allowance for doubtful accounts of $837 (December 31, 2013 — $887) 73,023 73,074 Financing receivables 104,869 107,110 Inventories 16,764 9,825 Prepaid expenses 4,444 3,602 Film assets 6,994 7,076 Property, plant and equipment 150,819 132,847 Other assets 19,068 27,034 Deferred income taxes 21,158 24,259 Other intangible assets 26,979 27,745 Goodwill 39,027 39,027 **Total assets** **$** **538,232** **$** **481,145** **Liabilities** Accounts payable $ 12,488 $ 19,396 Accrued and other liabilities 56,192 65,232 Deferred revenue 88,134 76,932 **Total liabilities** **156,814** **161,560** **Commitments and contingencies** **Non-controlling interests** **37,546** \- **Shareholders' equity** Capital stock, common shares — no par value. Authorized — unlimited number. Issued and outstanding — 68,423,128 (December 31, 2013 — 67,841,233) 332,611 327,313 Other equity 41,056 36,452 Accumulated deficit (29,307) (43,051) Accumulated other comprehensive loss (488) (1,129) **Total shareholders' equity** **343,872** **319,585** **Total liabilities and shareholders' equity** **$** **538,232** **$** **481,145** **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,** **Cash provided by (used in):** **2014** **2013** **Operating Activities** Net income $ 14,358 $ 14,677 Net (income) loss from discontinued operations (355) 139 Adjustments to reconcile net income to cash from operations: Depreciation and amortization 15,945 20,201 Write-downs, net of recoveries 1,579 55 Change in deferred income taxes 2,789 4,481 Stock and other non-cash compensation 8,090 6,317 Gain on curtailment of postretirement benefit plan \- (2,185) Unrealized foreign currency exchange loss 64 874 Loss from equity-accounted investments 574 654 Investment in film assets (5,147) (12,033) Changes in other non-cash operating assets and liabilities (3,219) (25,001) Net cash provided by (used in) operating activities from discontinued operations 572 (139) Net cash provided by operating activities 35,250 8,040 **Investing Activities** Purchase of property, plant and equipment (16,581) (5,054) Investment in joint revenue sharing equipment (10,801) (10,393) Investment in new business ventures \- (1,000) Acquisition of other intangible assets (970) (1,142) Net cash used in investing activities (28,352) (17,589) **Financing Activities** Issuance of subsidiary shares to non-controlling interests 40,491 \- Share issuance costs from the issuance of subsidiary shares to non-controlling interests (3,556) \- Common shares issued - stock options exercised 2,657 3,992 Settlement of restricted share units (790) \- Increase in bank indebtedness \- 12,000 Repayment of bank indebtedness \- (5,000) Credit facility amendment fees paid \- (2,088) Net cash provided by financing activities 38,802 8,904 Effects of exchange rate changes on cash (159) 83 **Increase (decrease) in cash and cash equivalents during the period** 45,541 (562) **Cash and cash equivalents, beginning of period** 29,546 21,336 **Cash and cash equivalents, end of period** $ 75,087 $ 20,774 **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 designs, manufactures, sells or leases IMAX theater projection system equipment. The theater system maintenance segment maintains IMAX theater projection system equipment in the IMAX theater network. The joint revenue sharing arrangements segment provides IMAX theater projection system equipment to an exhibitor in exchange for a share of box-office and concession revenues. The film production and IMAX DMR segment produces films and performs film re-mastering services. The film distribution segment distributes films for which the Company has distribution rights. The film post-production segment provides 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** **Six Months** **Ended June 30,** **Ended June 30,** **2014** **2013** **2014** **2013** **Revenue** **IMAX Theater Systems** IMAX Systems Sales and sales-type leases $ 14,478 $ 17,105 $ 18,985 $ 26,902 Ongoing rent, fees, and finance income 3,518 3,687 6,771 6,628 Other 3,730 3,569 5,242 5,349 21,726 24,361 30,998 38,879 Theater system maintenance 8,673 7,952 16,868 15,741 Joint revenue sharing arrangements 19,363 18,336 30,219 27,712 **Film** Production and IMAX DMR 24,050 25,952 39,235 40,307 Film distribution and post-production 5,333 5,112 10,022 8,740 29,383 31,064 49,257 49,047 **Total** **$** **79,145** **$** **81,713** **$** **127,342** **$** **131,379** **Gross margins** **IMAX Theater Systems** IMAX systems(1) Sales and sales-type leases $ 8,255 $ 7,154 $ 9,914 $ 12,462 Ongoing rent, fees, and finance income 3,334 3,575 6,448 6,481 Other 454 681 16 483 12,043 11,410 16,378 19,426 Theater system maintenance 2,781 3,160 5,782 6,214 Joint revenue sharing arrangements(1) 13,378 13,507 20,661 19,643 **Film** Production and IMAX DMR(1) 18,634 14,936 29,708 24,149 Film distribution and post-production 958 622 1,673 393 19,592 15,558 31,381 24,542 **Total** **$** **47,794** **$** **43,635** **$** **74,202** **$** **69,825** (1) IMAX systems include marketing and commission costs of $0.7 million and $0.9 million for the three and six months ended June 30, 2014, respectively (2013 — $0.4 million and $0.7 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $1.0 million and $1.2 million for the three and six months ended June 30, 2014, respectively (2013 — $0.9 million and $1.1 million, respectively). Production and DMR segment margins include marketing costs of $2.0 million and $3.2 million for the three and six months ended June 30, 2014, respectively (2013 — $1.4 million and $2.3 million, respectively). Distribution segment margins include marketing costs of $0.2 million and $0.4 million for the three and six months ended June 30, 2014, respectively (2013 — less than $0.1 million and $0.1 million, respectively). **IMAX CORPORATION** **OTHER INFORMATION** _(in thousands of U.S. dollars)_ **_Non-GAAP Financial Measures:_** In this release, the Company presents adjusted EBITDA attributable to Common Shareholders, adjusted net income attributable to Common Shareholders and adjusted net income attributable to Common Shareholders 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 attributable to Common Shareholders, adjusted net income attributable to Common Shareholders and adjusted net income attributable to Common Shareholders per diluted share because it believes that they are important supplemental measures of its comparable controllable operating performance and it wants to ensure that its investors fully understand the impact of its variable share-based compensation, provision for arbitration award and deferred taxes 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 attributable to Common Shareholders, adjusted net income attributable to Common Shareholders and adjusted net income attributable to Common Shareholders per diluted share should be considered in addition to, and not as a substitute for, net income and other measures of financial performance reported in accordance with GAAP. 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 $90.0 million on December 31, 2014, which requirement increases to $100.0 million on December 31, 2015. The Company must also maintain a Maximum Total Leverage Ratio (as defined in the Credit Agreement) of 2.00:1 on December 31, 2014, which requirement decreases to 1.75:1 on December 31, 2015. The ratio of total debt to EBITDA was nil:1 as at June 30, 2014, 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: **3 months ended** **12 months ended** **June 30, 2014** **June 30, 2014(1)** **_(In thousands of U.S Dollars)_** Net income $ 13,779 $ 43,796 Add (subtract): Loss from equity accounted investments 162 2,527 Provision for income taxes 5,407 16,221 Interest expense, net of interest income 244 1,116 Depreciation and amortization, including film asset amortization 8,258 32,392 Write-downs net of recoveries including asset impairments and receivable provisions 1,061 2,860 Stock and other non-cash compensation 4,809 14,458 EBITDA attributable to non-controlling interests(2) (889) (889) $ 32,831 $ 112,481 (1)  Ratio of funded debt calculated using twelve months ended EBITDA. (2)  The EBITDA calculation specified for purposes of the minimum EBITDA covenant excludes the reduction in EBITDA from the Company's non-controlling interests. **IMAX CORPORATION** **OTHER INFORMATION** _(in thousands of U.S. dollars)_ **_Adjusted Net Income and Adjusted Diluted Per Share Calculations – Quarter Ended June 30, 2014 vs. 2013:_** The Company reported net income attributable to Common Shareholders of $13.3 million or $0.19 per basic and diluted share for the second quarter of 2014, as compared to $11.8 million or $0.18 per basic share and $0.17 per diluted share for the second quarter of 2013. Net income attributable to Common Shareholders for the second quarter of 2014 includes a $4.7 million charge, or $0.07 per diluted share, for stock-based compensation (2013 - $3.1 million or $0.05 per diluted share). Adjusted net income attributable to Common Shareholders, which consists of net income attributable to Common Shareholders excluding stock-based compensation expense and the related tax impact, was $17.2 million, or $0.25 per diluted share, in the second quarter of 2014, as compared to adjusted net income attributable to Common Shareholders of $15.0 million, or $0.22 per diluted share, for the second quarter of 2013. A reconciliation of net income attributable to Common Shareholders, the most directly comparable U.S. GAAP measure, to adjusted net income attributable to Common Shareholders and adjusted net income attributable to Common Shareholders per diluted share is presented in the table below: **Three Months Ended** **Three Months Ended** **June 30, 2014** **June 30, 2013** **Net Income** **Diluted EPS** **Net Income** **Diluted EPS** Reported net income attributable to Common Shareholders $ 13,307 $ 0.19 (1) $ 11,816 $ 0.17 Adjustments: Stock-based compensation 4,715 0.07 3,125 0.05 Tax impact on items listed above (828) (0.01) 31 \- Adjusted net income attributable to Common Shareholders $ 17,194 $ 0.25 (1) $ 14,972 $ 0.22 Weighted average diluted shares outstanding 69,452 68,893 (1) Includes impact of $0.1 million of accretion charges associated with redeemable common stock. **_Adjusted Net Income and Adjusted Diluted Per Share Calculations – Six Months Ended June 30, 2014 vs. 2013:_** The Company reported net income attributable to Common Shareholders of $13.9 million or $0.21 per basic share and $0.20 per diluted share for the six months ended June 30, 2014, as compared to $14.7 million or $0.22 per basic share and $0.21 per diluted share for the six months ended June 30, 2013. Net income attributable to Common Shareholders for the six months ended June 30, 2014 includes a $7.9 million charge, or $0.11 per diluted share, for stock-based compensation (2013 – $5.9 million or $0.09 per diluted share). Adjusted net income attributable to Common Shareholders, which consists of net income attributable to Common Shareholders excluding stock-based compensation expense and the related tax expense, was $20.4 million, or $0.29 per diluted share, in the six months ended June 30, 2014, as compared to adjusted net income attributable to Common Shareholders of $20.5 million, or $0.30 per diluted share, for the six months ended June 30, 2013. A reconciliation of net income attributable to Common Shareholders, the most directly comparable U.S. GAAP measure, to adjusted net income attributable to Common Shareholders and adjusted net income attributable to Common Shareholders per diluted share is presented in the table below: **Six Months Ended** **Six Months Ended** **June 30, 2014** **June 30, 2013** **Net Income** **Diluted EPS** **Net Income** **Diluted EPS** Reported net income attributable to Common Shareholders $ 13,886 $ 0.20 (1) $ 14,677 $ 0.21 Adjustments: Stock-based compensation 7,903 0.11 5,933 0.09 Tax expense of items listed above (1,343) (0.02) (74) \- Adjusted net income attributable to Common Shareholders $ 20,446 $ 0.29 (1) $ 20,536 $ 0.30 Weighted average diluted shares outstanding 69,448 68,769 (1) Includes impact of $0.1 million of accretion charges associated with redeemable common stock. **_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** **6 months ended** **June 30, 2014** **_(In thousands of U.S. Dollars)_** Net cash provided by operating activities $ 35,250 Net cash used in investing activities (28,352) Free cash flow $ 6,898 Logo- [http://photos.prnewswire.com/prnh/20111107/MM01969LOGO](http://photos.prnewswire.com/prnh/20111107/MM01969LOGO) SOURCE IMAX Corporation