--- title: IMAX Corporation Reports Second-Quarter 2016 Financial Results publisher: "IMAX" description: "HIGHLIGHTS - Robust Q2 2016 signings of 95 IMAX® theatre systems, up 217% year-over-year - IMAX increases 2016 installation guidance to 155 theatres, up from original 2016 guidance of 115 to 120 theatres, underscoring strong worldwide demand for IMAX theatres - Record backlog of 442 systems" canonical: "https://www.imax.com/pr/imax-corporation-reports-second-quarter-2016-financial-results" date: 2016-07-20 last_updated: 2016-07-20 --- IMAX Corporation Reports Second-Quarter 2016 Financial Results ============================================================== Wed, Jul 20, 2016 **HIGHLIGHTS** **\- Robust Q2 2016 signings of 95 IMAX® theatre systems, up 217% year-over-year** **\- IMAX increases 2016 installation guidance to 155 theatres, up from original 2016 guidance of 115 to 120 theatres, underscoring strong worldwide demand for IMAX theatres** **\- Record backlog of 442 systems represents 40% growth to existing network of 1,102 theatres** NEW YORK, July 20, 2016**/PRNewswire/ -- IMAX Corporation(NYSE: IMAX)**today reported second-quarter 2016 revenues of $91.7 millionand GAAP net income after non-controlling interest of $7.8 million, or $0.11per share. Adjusted net income after non-controlling interest was $12.1 million, or $0.18per diluted share. EBITDA as calculated in accordance with the Company's credit facility was $29.0 million. For reconciliations of adjusted net income to reported net income, adjusted earnings per share to reported earnings per share, and for the definition and reconciliation of EBITDA as calculated in accordance with the Company's credit facility, please see the tables at the end of this press release. "Demand for IMAXtheatres has never been stronger and bodes well for our business as more signings lead to more installs, which then lead to more box office, and, ultimately, to greater revenue. Including the 95 theatres signed in the second quarter, we have signed nearly as many deals in the first half of 2016 as we did in all of 2015. This robust signings momentum has resulted in a record backlog, which includes a 40-theatre full revenue-share agreement with Guangzhou JinYi Media Corporation, a 25-theatre deal with AMC Theatres and additional multi-theatre agreements with several other key exhibition partners, and improves visibility into installations and ultimately revenue over the next several years.  As a result, we are once again raising our installation guidance –this time to 155 theatres, up from our prior guidance range of 135 to 140 theatres and compared to our original 2016 install guidance range of 115 to 120 that was set late last year," said IMAXCEO Richard L. Gelfond. **Network Update:** During the quarter, the Company installed 40 theatres, of which 38 were for new theatre locations and two were upgrades. The Company also signed contracts for 95 theatres in the second quarter of 2016. The total IMAXtheatre network consisted of 1,102 systems as of June 30, 2016, of which 990 were in commercial multiplexes. There were 442 theatres in backlog as of June 30, 2016, up 14% from the 388 in backlog as of March 31, 2016. For a breakdown of theatre system signings, installations, network and backlog by type, please see the end of this press release. **Box Office Update:** Gross box office from IMAX DMR® titles was $260.8 millionin the second quarter of 2016, compared with $343.0 millionin the prior-year period, which was the highest-grossing box office quarter in Company history and included _Furious 7_,_Jurassic World_, and _Avengers: Age of Ultron_last year. The average global DMR box office per-screen average in the second quarter of 2016 was $268,200. "While IMAX faced a challenging comparison to last year's second-quarter box office – which was the highest-grossing box office quarter in Company history – considering the strong outperformance in box office we saw in the first quarter, we believe our portfolio of titles released across the full year will result in an annual box office that is relatively consistent with our historical PSA. Looking ahead, we expect our heightened network growth in 2016, which is heavily weighted towards our joint revenue-sharing model, will position us well to capitalize on a promising array of upcoming tentpole franchises and sequels this year and next, including _Suicide Squad_, Marvel's _Dr. Strange_, _Fantastic Beasts and Where to Find Them_, _Rogue One: A Star Wars Story, Kong: Skull Island_, _Guardians of the Galaxy Vol. 2_,_Spider-Man Homecoming_, and, of course, _Star Wars: Episode VIII_." **Second-Quarter Segment Results** * Revenue from sales and sales-type leases was $18.7 millionin the second quarter of 2016, compared with $18.7 millionin the second quarter of 2015. The Company installed 13 full theatre systems under sales and sales-type lease arrangements in the most recent quarter, compared with the 15 full sales-type theatres the Company installed in the second quarter of 2015. * Revenue from joint revenue-sharing arrangements was $23.9 millionin the quarter, compared with $31.6 millionin the prior-year period. During the quarter, the Company installed 25 new theatres under joint revenue-sharing arrangements, compared with 20 in the second quarter of 2015. The Company had 559 theatres operating under joint revenue-sharing arrangements as of June 30, 2016, as compared to 477 joint revenue-sharing theatres one year prior. * Production and DMR revenues were $27.4 millionin the second quarter of 2016, compared with $36.6 millionin the second quarter of 2015. As mentioned above, gross box office from DMR titles was $260.8 millionin the second quarter of 2016, compared with $343.0 millionin the prior-year period, which was the highest grossing box office quarter in Company history and included _Furious 7_,_Jurassic World_, and _Avengers: Age of Ultron_last year. The global DMR per screen average in the second quarter of 2016 was $268,200, compared with $414,600in same period last year. * Gross margin of 54.8%, compared with 64.4% last year, primarily resulting from lower box office, higher DMR cost and a larger mix of hybrid sales in the quarter. * Operating expenses (which include SG&A and R&D, and excludes stock-based compensation) were $27.7 millionin the quarter, compared with $26.3 millionin the second quarter of 2015. **Share Buybacks** The Company repurchased 1,344,094 shares in the second quarter of 2016, which does not include 68,430 shares purchased in connection with the Company's long-term incentive plan. The Company purchased the shares at an average price of $30.55, for a total value of $41.1 million. **Conference Call **The Company will host a conference call today at 4:30 PM ETto discuss its second-quarter 2016 financial results. To access the call via telephone, interested parties in the US and Canadashould dial (800) 505-9568 approximately 5 to 10 minutes before the call begins. Other international callers should dial (416) 204-9271. The conference ID for the call is 1146762. 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 1146762. **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 Jun. 30, 2016, there were 1,102 IMAXtheatres (990 commercial multiplexes, 16 commercial destinations and 96 institutions) in 69 countries. On Oct. 8, 2015, shares of IMAX China, a subsidiary of IMAX Corp., began trading on the Hong Kong Stock Exchangeunder the stock code "HK.1970." IMAX®, IMAX® 3D, IMAX DMR®, Experience It In IMAX®, An IMAX 3D Experience®, The IMAX Experience®, IMAX Is Believing® and 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 consolidated subsidiaries (the "Company") and expectations regarding the Company's future operating, financial and technological results. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. However, whether actual results and developments will conform with the expectations and predictions of the Company is subject to a number of risks and uncertainties, including, but not limited to,__the signing of theater system agreements; conditions, changes and developments in the commercial exhibition industry; the performance of IMAX DMR films; the potential impact of increased competition in the markets within which the Company operates; competitive actions by other companies; the failure to respond to change and advancements in digital technology; risks 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 Company's largest customer accounting for a significant portion of the Company's revenue and backlog; risks related to new business initiatives; conditions in the in-home and out-of-home entertainment industries; the opportunities (or lack thereof) that may be presented to and pursued by the Company; risks related to cyber-security; risks related to the Company's inability to protect its intellectual property; risks related to the Company's implementation of a new enterprise resource planning system; general economic, market or business conditions; the failure to convert theater system backlog into revenue; changes in laws or regulations; 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._ _**Investors:**_ _**Media:**_ _IMAX Corporation, New York_ _IMAX Corporation, New York_ _Jessica Kourakos_ _Ann Sommerlath_ _212-821-0100_ _212-821-0155_ _jkourakos@imax.com_  _asommerlath@imax.com_ _Michael Mougias_ _**Entertainment Media:**_ _[mmougias@imax.com](mailto:mmougias@imax.com)_ _Principal Communications Group, Los Angeles_ _Melissa Zuckerman/Paul Pflug_ _323-658-1555_ _**Business Media:**_ _[melissa@pcommgroup.com](mailto:melissa@pcommgroup.com)_ _Sloane & Company, New York_ __[paul@pcommgroup.com](mailto:paul@pcommgroup.com)__ _Whit Clay_ _212-446-1864_ _[wclay@sloanepr.com](mailto:wclay@sloanepr.com)_ **Signings and Installations** June 30, 2016 **Three Months** **Ended June 30,** **Theater Signings:** **2016** **2015** Full new sales and sales-type lease arrangements 19 19 (1) New joint revenue sharing arrangements 75 9 **Total new theaters** **94** **28** Upgrades of IMAX theater systems 1 2 **Total Theater Signings** **95** **30** **Three Months** **Ended June 30,** **Theater Installations:** **2016** **2015** Full new sales and sales-type lease arrangements 13 (2) 15 (2) New joint revenue sharing arrangements 25 20 **Total new theaters** **38** **35** Upgrades of IMAX theater systems 2 (3) \- **Total Theater Installations** **40** **35** **As of June 30,** **Theater Backlog:** **2016** **2015** New sales and sales-type lease arrangements 178 181 New joint revenue sharing arrangements 264 210 **Total new theaters** **442** (4)(5) **391** (4)(6) **As of June 30,** **Theater Network:** **2016** **2015** Commercial Multiplex Theaters: Sales and sales-type lease arrangements 431 375 Joint revenue sharing arrangements 559 477 **Total Commercial Multiplex Theaters** **990** **852** Commercial Destination Theaters 16 20 Institutional Theaters 96 104 **Total IMAX Theater Network** **1,102** **976** (1) Includes one signing which replaced a theatre system under an existing arrangement in backlog. (2) Includes one used theater system (2015 – one theater system). (3) Includes one installation of an upgrade to a laser-based digital system and one upgrade to a xenon-based digital system under sales and sales-type lease arrangements. (4) Includes 19 laser-based digital theater system configurations (2015 – 73), including upgrades. The Company continues to develop and roll out its laser-based digital projection system. (5) Includes seven upgrades to a digital theater system, in existing IMAXtheater locations (one xenon configuration and six laser configurations). (6) Includes 24 upgrades to a digital theater system, in existing IMAXtheater locations (two xenon configurations and 22 laser configurations, of which five are under joint revenue sharing arrangements). **Additional Information (continued)** In addition to the 21 IMAX DMR films released to the IMAXtheater network during the first six months ended June 30, 2016, 21 additional IMAX DMR films have been announced so far to be released in the remaining six months of 2016: * Ice Age: Collision Course: An IMAX 3D Experience (20thCentury Fox, July 2016); * The BFG: An IMAX 3D Experience (Walt Disney Studios, July 2016); * Jason Bourne: The IMAX Experience (Universal Studios, July 2016); * Godzilla: Resurgence: The IMAX Experience (Toho-Towa Company, Ltd., July 2016, Japanonly); * Cold War 2: An IMAX 3D Experience (Edko Films, July 2016, Chinaonly); * Ghostbusters: An IMAX 3D Experience (Sony Pictures, July 2016); * For A Few Bullets: The IMAX Experience (Wanda Media Co., July 2016, Chinaonly); * Star Trek Beyond: An IMAX 3D Experience (Paramount Pictures, July 2016); * Skiptrace: An IMAX 3D Experience (Talent Int., August 2016, Chinaonly); * Time Raiders: An IMAX 3D Experience (Le Vision Pictures, August 2016, Chinaonly); * Suicide Squad: An IMAX 3D Experience (Warner Bros. Pictures, August 2016); * Ben-Hur: An IMAX 3D Experience (Paramount Pictures, August 2016); * Sully: The IMAX Experience (Warner Bros. Pictures, September 2016); * The Magnificent Seven: The IMAX Experience (Sony Pictures, September 2016); * Deepwater Horizon: The IMAX Experience (Lionsgate Entertainment, September 2016); * Inferno: The IMAX Experience (Sony Pictures, October 2016); * Jack Reacher: Never Go Back: The IMAX Experience (Paramount Pictures, October 2016); * The Duelist: The IMAX Experience (Non-Stop Production LLC, October 2016, Russiaonly); * Doctor Strange: An IMAX 3D Experience (Walt Disney Studios, November 2016); * Fantastic Beasts and Where to Find Them: An IMAX 3D Experience (Warner Bros. Pictures, November 2016); and * Rogue One: A Star Wars Story: An IMAX 3D Experience (Walt Disney Studios, December 2016). In addition, the Company will be releasing an IMAXdocumentary film, Voyage of Time, on October 7, 2016. To date, the Company has announced the following 13 titles to be released in 2017 to the IMAXtheater network: * Attraction: An IMAX 3D Experience (Art Pictures Studio, January 2017, Russiaonly); * God Particle: The IMAX Experience (Paramount Pictures, February 2017); * Untitled Wolverine Film: The IMAX Experience (20th Century Fox, March 2017); * Kong: Skull Island: An IMAX 3D Experience (Warner Bros. Pictures, March 2017); * Ghost in the Shell: An IMAX 3D Experience (Paramount Pictures, March 2017); * Guardians of the Galaxy Vol. 2: An IMAX 3D Experience (Walt Disney Studios, May 2017); * Pirates of the Caribbean: Dead Men Tell No Tales: An IMAX 3D Experience (Walt Disney Studios, May 2017); * Transformers: The Last Knight: An IMAX 3D Experience (Paramount Pictures, June 2017); * Spider-Man: Homecoming: An IMAX 3D Experience (Sony Pictures, July 2017); * Dunkirk: The IMAX Experience (Warner Bros. Pictures, July 2017); * Thor: Ragnarök: An IMAX 3D Experience (Walt Disney Studios, November 2017); * Justice League: An IMAX 3D Experience (Warner Bros. Pictures, November 2017); and * Star Wars: Episode VIII: An IMAX 3D Experience (Walt Disney Studios, December 2017); The Company remains in active negotiations with all of the major Hollywoodstudios for additional films to fill out its short and long-term film slate, and anticipates that a similar number of IMAX DMR films will be released to the IMAXnetwork in 2016 to the 44 films that were released to the IMAXnetwork in 2015. **IMAX CORPORATION** **CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS** _(In thousands of U.S. dollars, except per share amounts)_ **_(Unaudited)_** **Three Months** **Six Months** **Ended June 30,** **Ended June 30,** **2016** **2015** **2016** **2015** **Revenues** Equipment and product sales $ 26,489 $ 25,305 $ 50,229 $ 39,741 Services 41,385 50,958 85,658 82,674 Rentals 20,752 28,527 42,531 42,341 Finance income 2,367 2,229 4,703 4,474 Other 750 141 750 141 **91,743** **107,160** **183,871** **169,371** **Costs and expenses applicable to revenues** Equipment and product sales 15,594 13,521 33,385 21,061 Services 20,528 19,495 38,124 34,302 Rentals 5,298 5,109 9,863 8,992 Other 46 \- 46 \- **41,466** **38,125** **81,418** **64,355** **Gross margin** **50,277** **69,035** **102,453** **105,016** Selling, general and administrative expenses 30,436 29,023 62,020 57,375 (including share-based compensation expense of $6.2 million and  $14.7 million for the three and six months ended June 30, 2016, respectively (2015 - expense of $5.1 million and $10.7 million, respectively)) Research and development 3,435 2,347 7,143 6,889 Amortization of intangibles 515 443 1,006 873 Receivable provisions, net of recoveries 230 343 356 348 Impairment of investments 194 350 194 350 **Income from operations** **15,467** **36,529** **31,734** **39,181** Interest income 380 259 847 505 Interest expense (458) (403) (856) (707) **Income from operations before income taxes** **15,389** **36,385** **31,725** **38,979** Provision for income taxes (3,366) (9,256) (7,084) (9,931) Loss from equity-accounted investments, net of tax (1,340) (749) (1,781) (1,183) **Net income** **10,683** **26,380** **22,860** **27,865** Less: net income attributable to non-controlling interests (2,892) (2,030) (5,542) (3,124) **Net income attributable to common shareholders** **$** **7,791** **$** **24,350** **$** **17,318** **$** **24,741** **Net income per share attributable to common shareholders - basic & diluted:** Net income per share - basic **$** **0.11** **$** **0.34** **$** **0.25** **$** **0.35** Net income per share - diluted **$** **0.11** **$** **0.34** **$** **0.25** **$** **0.34** Weighted average number of shares outstanding (000's): Basic 67,768 69,843 68,540 69,526 Fully Diluted 68,455 71,688 69,222 71,349 Additional Disclosure: Depreciation and amortization(1) $ 11,626 $ 11,091 $ 22,064 $ 20,724 (1) Includes $0.2 million and $0.3 million of amortization of deferred financing costs charged to interest expense for the three and six months ended June 30, 2016, respectively (2015 - $0.2 million and $0.4 million, respectively). ****IMAX CORPORATION**** CONDENSED CONSOLIDATED BALANCE SHEETS _(In thousands of U.S. dollars)_ **_(Unaudited)_** **As at** **As at** **June 30** **December 31** **2016** **2015** **Assets** Cash and cash equivalents $ 228,081 $ 317,449 Accounts receivable, net of allowance for doubtful accounts of $1,319 (December 31, 2015 — $1,146) 94,687 97,981 Financing receivables 118,884 117,231 Inventories 44,776 38,753 Prepaid expenses 8,754 6,498 Film assets 16,859 14,571 Property, plant and equipment 234,480 218,267 Other assets 26,017 26,136 Deferred income taxes 25,893 26,666 Other intangible assets 29,279 28,950 Goodwill 39,027 39,027 **Total assets** **$** **866,737** **$** **931,529** **Liabilities** Bank indebtedness $ 28,296 $ 29,276 Accounts payable 21,451 23,455 Accrued and other liabilities 83,539 95,748 Deferred revenue 106,967 104,993 **Total liabilities** **240,253** **253,472** **Commitments and contingencies** **Non-controlling interests** **3,221** **3,307** **Shareholders' equity** Capital stock common shares — no par value. Authorized — unlimited number. 67,112,751 — issued and 67,112,358 — outstanding (December 31, 2015 — 69,673,244 — issued and outstanding) 435,711 448,310 Less: Treasury stock held in trust, 393 shares at cost (13) \- Other equity 172,645 168,425 Accumulated (deficit) earnings (34,923) 15,499 Accumulated other comprehensive loss (4,471) (7,443) **Total shareholders' equity attributable to common shareholders** **568,949** **624,791** Non-controlling interests 54,314 49,959 **Total shareholders' equity** **623,263** **674,750** **Total liabilities and shareholders' equity** **$** **866,737** **$** **931,529** **IMAX CORPORATION** **CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS** _(In thousands of U.S. dollars)_ **_(Unaudited)_** **Six Months Ended June 30,** **2016** **2015** **Cash provided by (used in):** **Operating Activities** Net income $ 22,860 $ 27,865 Adjustments to reconcile net income to cash from operations: Depreciation and amortization 22,064 20,724 Write-downs, net of recoveries 1,249 1,457 Change in deferred income taxes (29) 2,232 Stock and other non-cash compensation 15,014 10,861 Unrealized foreign currency exchange (gain) loss (583) 851 Loss from equity-accounted investments 1,980 1,923 Gain on non-cash contribution to equity-accounted investees (199) (740) Investment in film assets (10,890) (7,404) Changes in other non-cash operating assets and liabilities (15,399) (39,271) **Net cash (used in) provided by operating activities** **36,067** **18,498** **Investing Activities** Purchase of property, plant and equipment (8,472) (34,920) Investment in joint revenue sharing equipment (20,700) (11,613) Acquisition of other intangible assets (1,691) (2,972) **Net cash used in investing activities** **(30,863)** **(49,505)** **Financing Activities** Increase in bank indebtedness \- 17,568 Repayment of bank indebtedness (1,000) \- Repurchase of common shares (85,714) \- Settlement of restricted share units and options (8,369) (4,988) Common shares issued - stock options exercised 3,582 22,850 Taxes paid on secondary sale and repatriation dividend (2,991) \- Taxes withheld and paid on employee stock awards vested (73) \- Treasury stock purchased for future settlement of restricted share units (13) (1,214) Credit facility amendment fees paid \- (1,161) Issuance of subsidiary shares to non-controlling interests - private offering \- 40,000 Share issuance costs from the issuance of subsidiary shares to non-controlling interests - private offering \- (2,000) **Net cash (used in) provided by financing activities** **(94,578)** **71,055** Effects of exchange rate changes on cash 6 (168) **(Decrease) increase in cash and cash equivalents during period** **(89,368)** **39,880** **Cash and cash equivalents, beginning of period** **317,449** **106,503** **Cash and cash equivalents, end of period** $ **228,081** $ **146,383** **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: IMAXsystems; theater system maintenance; joint revenue sharing arrangements; film production and IMAX DMR; film distribution; film post-production; and other. The IMAXsystems segment includes the design, manufacture, sale or lease of IMAXtheater projection system equipment. The theater system maintenance segment includes the maintenance of IMAXtheater projection system equipment in the IMAXtheater network. The joint revenue sharing arrangements segment includes the provision of IMAXtheater projection system equipment to an exhibitor in exchange for a share of the box-office and concession revenues. The film production and IMAX DMR segment includes the production of films and the 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 provides film post-production and film print services. The other segment includes certain IMAXtheaters that the Company owns and operates, camera rentals and other miscellaneous items. **Three Months** **Six Months** **Ended June 30,** **Ended June 30,** **2016** **2015** **2016** **2015** **Revenue** **IMAX Theater Systems** IMAX Systems Sales and sales-type leases $ 18,720 $ 18,674 $ 36,718 $ 27,289 Ongoing rent, fees, and finance income 4,241 3,691 8,103 7,190 Other 5,009 4,674 9,490 8,099 27,970 27,039 54,311 42,578 Theater System Maintenance 9,912 9,158 19,738 18,008 Joint Revenue Sharing Arrangements 23,856 31,594 47,242 47,462 **Film** Production and IMAX DMR 27,413 36,603 57,218 54,279 Film distribution and post-production 2,592 2,766 5,362 7,044 30,005 39,369 62,580 61,323 **Total** $ 91,743 $ 107,160 $ 183,871 $ 169,371 **Gross margins** **IMAX Theater Systems** IMAX systems(1) Sales and sales-type leases $ 9,540 $ 10,038 $ 13,859 $ 14,945 Ongoing rent, fees, and finance income 4,135 3,499 7,650 6,777 Other 162 (114) (320) (154) 13,837 13,423 21,189 21,568 Theater System Maintenance 3,370 3,089 6,809 6,370 Joint Revenue Sharing Arrangements(1) 15,744 24,069 33,736 34,686 **Film** Production and IMAX DMR(1) 17,127 28,488 39,950 41,713 Film distribution and post-production(1) 199 (34) 769 679 17,326 28,454 40,719 42,392 **Total** $ 50,277 $ 69,035 $ 102,453 $ 105,016 \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (1) IMAX systems include marketing and commission costs of $0.6 million and $1.1 million for the three and six months ended June 30, 2016, respectively (2015 - $0.6 million and $0.9 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $1.4 million and $1.5 million for the three and six months ended June 30, 2016, respectively (2015 - $1.3 million and $1.4 million, respectively). Production and DMR segment margins include marketing costs of $5.2 million and  $7.5 million for the three and six months ended June 30, 2016, respectively (2015 - $3.6 million and $4.9 million, respectively). Distribution segment margins include marketing expense of $0.8 million and $1.5 million for the three and six months ended June 30, 2016, respectively (2015 - cost of less than $0.1 million and cost recovery of $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 net income, adjusted net income per diluted share, adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share as supplemental measures of performance of the Company, which are not recognized under U.S. GAAP. The Company presents adjusted net income and adjusted net income per diluted share because it believes that they are important supplemental measures of its comparable controllable operating performance and it wants to ensure that its investors fully understand the impact of its stock-based compensation (net of any related tax impact) on net income. In addition, the Company presents adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share because it believes that they are important supplemental measures of its comparable financial results and could potentially distort the analysis of trends in business performance and it wants to ensure that its investors fully understand the impact of net income attributable to non-controlling interests and its stock-based compensation (net of any related tax impact) in determining net income attributable to common shareholders. Management uses these measures to review operating performance on a comparable basis from period to period. However, these non-GAAP measures may not be comparable to similarly titled amounts reported by other companies. Adjusted net income, adjusted net income per diluted share, adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share should be considered in addition to, and not as a substitute for, net income and net income attributable to common shareholders and other measures of financial performance reported in accordance with U.S. GAAP. The Credit Facility provides that the Company will be required at all times to satisfy a Minimum Liquidity Test (as defined in the Credit Agreement) of at least $50.0 million. The Company will also be required to maintain minimum adjusted EBITDA (as defined in the credit agreement) of $100.0 million. The Company must also maintain a Maximum Total Leverage Ratio (as defined in the credit agreement) of 2.25:1.0, which requirement decreases to (i) 2.0:1.0 on December 31, 2016; and (ii) 1.75:1.0 on December 31, 2017. The Company was in compliance with all of these requirements at June 30, 2016. The ratio of total debt to adjusted EBITDA was 0.21:1 as at June 30, 2016, 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 $28.7 million. Adjusted EBITDA is calculated as follows: **For the** **For the** **For the** **3 months ended** **12 months ended** **3 months ended** **June 30, 2016** **June 30, 2016** (1) **June 30, 2015** **_(In thousands of U.S. Dollars)_** Net income $ 10,683 $ 59,619 $ 26,380 Add (subtract): Loss from equity accounted investments 1,340 3,000 749 Provision for income taxes 3,366 17,205 9,256 Interest expense, net of interest income 78 500 144 Depreciation and amortization, including film asset amortization 11,496 43,252 10,861 Write-downs, net of recoveries including asset impairments and receivable provisions 601 3,517 1,329 Stock and other non-cash compensation 6,347 26,532 5,195 EBITDA before non-controlling interests 33,911 153,625 53,914 EBITDA attributable to non-controlling interests(2) (4,876) (18,667) (3,538) EBITDA attributable to common shareholders $ 29,035 $ 134,958 $ 50,376 \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (1) Ratio of funded debt calculated using twelve months ended EBITDA. (2) The EBITDA calculation specified for purpose 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,_****_2016_****_vs._** **_2015_****_:_** The Company reported net income of $10.7 millionor $0.16 per basic and diluted share for the second quarter of 2016 as compared to net income of $26.4 million or $0.37 per basic share and $0.36per diluted share for the second quarter of 2015. Net income for the second quarter of 2016 includes a $6.2 million charge or $0.09 per diluted share (2015 — $5.1 million or $0.07 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 $15.1 millionor $0.22per diluted share for the second quarter of 2016 as compared to adjusted net income of $30.7 millionor $0.42per diluted share for the quarter ended June 30, 2015. Adjusted net income attributable to common shareholders, which consists of net income attributable to common shareholders excluding the impact of stock-based compensation and the related tax impact, was $12.1 millionor $0.18per diluted share for the second quarter of 2016 as compared to adjusted net income attributable to common shareholders of $28.7 millionor $0.40per diluted share for the second quarter of 2015. A reconciliation of net income and net income attributable to common shareholders, the most directly comparable U.S. GAAP measure, to adjusted net income, adjusted net income per diluted share, adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share is presented in the table below: **Quarter Ended June 30,** **2016** **2015** **Net Income** **Diluted EPS** **Net Income** **Diluted EPS** Reported net income $ 10,683 $ 0.16 $ 26,380 $ 0.36 (1) Adjustments: Stock-based compensation 6,205 0.09 5,103 0.07 Tax impact on items listed above (1,744) (0.03) (740) (0.01) Adjusted net income 15,144 0.22 30,743 0.42 (1) Net income attributable to non-controlling interests (2,892) (0.04) (2,030) (0.02) Stock-based compensation (net of tax of less than $0.1 million) attributable to non-controlling interests (168) \- \- \- Adjusted net income attributable to common shareholders $ 12,084 $ 0.18 $ 28,713 $ 0.40 (1) Weighted average diluted shares outstanding 68,455 71,688 \_\_\_\_\_\_\_\_\_\_\_\_\_ (1) Includes impact of $0.3 million of accretion charges associated with redeemable Class C shares of IMAX China. **_Adjusted Net Income and Adjusted Diluted Per Share Calculations – Period Ended_** **_June 30,_****_2016_****_vs._** **_2015_** The Company reported net income of $22.9 millionor $0.33per basic and diluted share for the six months ended June 30, 2016, as compared to net income of $27.9 millionor $0.39per basic share and $0.38per diluted share for the six months ended June 30, 2015. Net income for the six months ended June 30, 2016includes a $14.7 millioncharge or $0.21per diluted share (2015 — $10.7 millionor $0.15per 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 $33.4 millionor $0.48per diluted share for the six months ended June 30, 2016, as compared to adjusted net income of $36.8 millionor $0.51per diluted share for the six months ended June 30, 2015. Adjusted net income attributable to common shareholders, which consists of net income attributable to common shareholders excluding the impact of stock-based compensation and the related tax impact, was $27.6 millionor $0.40per diluted share for the six months ended June 30, 2016, as compared to adjusted net income attributable to common shareholders of $33.7 millionor $0.47per diluted share for the six months ended June 30, 2015. A reconciliation of net income and net income attributable to common shareholders, the most directly comparable U.S. GAAP measure, to adjusted net income, adjusted net income per diluted share, adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share is presented in the table below: **Six Months Ended June 30,** **2016** **2015** **Net Income** **Diluted EPS** **Net Income** **Diluted EPS** Reported net income $ 22,860 $ 0.33 $ 27,865 $ 0.38 (1) Adjustments: Stock-based compensation 14,743 0.21 10,678 0.15 Tax impact on items listed above (4,184) (0.06) (1,702) (0.02) Adjusted net income 33,419 0.48 36,841 0.51 (1) Net income attributable to non-controlling interests (5,542) (0.08) (3,124) (0.04) Stock-based compensation (net of tax of $0.1 million) attributable to non-controlling interests (293) \- \- \- Adjusted net income attributable to common shareholders $ 27,584 $ 0.40 $ 33,717 $ 0.47 (1) Weighted average diluted shares outstanding 69,222 71,349 \_\_\_\_\_\_\_\_\_\_\_\_\_ (1) Includes impact of $0.5 million of accretion charges associated with redeemable Class C shares of IMAX China. **_Free Cash Flow: _**Free cash flow is defined as cash provided by operating activities minus cash used in investing activities (from the consolidated statements of cash flows). Cash provided by operating activities consist of net income, plus depreciation and amortization, plus the change in deferred income taxes, plus other non-cash items, plus changes in working capital, less investment in film assets, plus other changes in operating assets and liabilities. Cash used in investing activities includes capital expenditures, acquisitions and other cash used in investing activities. Management views free cash flow, a non-GAAP measure, as a measure of the Company's after-tax cash flow available to reduce debt, add to cash balances, and fund other financing activities. Free cash flow does not represent residual cash flow available for discretionary expenditures. A reconciliation of cash provided by operating activities to free cash flow is presented in the table below: **For the** **For the** **3 months ended** **6 months ended** **June 30, 2016** **June 30, 2016** **_(In thousands of U.S. Dollars)_** Net cash provided by operating activities $ 31,103 $ 36,067 Net cash used in investing activities (21,520) (30,863) Free cash flow $ 9,583 $ 5,204 To view the original version on PR Newswire, visit:[http://www.prnewswire.com/news-releases/imax-corporation-reports-second-quarter-2016-financial-results-300301695.html](http://www.prnewswire.com/news-releases/imax-corporation-reports-second-quarter-2016-financial-results-300301695.html) SOURCE IMAX Corporation