--- title: IMAX Corporation Reports Third-Quarter 2016 Financial Results publisher: "IMAX" description: "NEW YORK , Oct. 20, 2016 /PRNewswire/ -- HIGHLIGHTS IMAX increases installation guidance to a range of 155 to 160 theatres, up from prior guidance of 155 theatres Signed a record 162 theatre systems in the third quarter, bringing first nine month signings to 293, eclipsing the 138 system signings" canonical: "https://www.imax.com/pr/imax-corporation-reports-third-quarter-2016-financial-results" date: 2016-10-20 last_updated: 2016-11-09 --- IMAX Corporation Reports Third-Quarter 2016 Financial Results ============================================================= Thu, Oct 20, 2016 NEW YORK, Oct. 20, 2016/PRNewswire/ **\--** HIGHLIGHTS * IMAXincreases installation guidance to a range of 155 to 160 theatres, up from prior guidance of 155 theatres * Signed a record 162 theatre systems in the third quarter, bringing first nine month signings to 293, eclipsing the 138 system signings for all of 2015 * Installed 48 new IMAX® theatres—a third-quarter Company record * Domestic Per Screen Average of $174,200in third quarter, up 8% vs. the prior year period * Announced pilot virtual reality facilities in Los Angelesand Manchester, England, both to open late 2016 **IMAX Corporation(NYSE: IMAX)**today reported third-quarter 2016 revenues of $86.6 millionand net income attributable to common shareholders of $2.5 million, or $0.04per share. Adjusted net income attributable to common shareholders was $7.9 million, or $0.12per diluted share. EBITDA as calculated in accordance with the Company's credit facility was $24.5 million. For reconciliations of adjusted net income to reported net income, adjusted net income per diluted share to reported net income per diluted share, and for the definition and reconciliation of EBITDA as calculated in accordance with the Company's credit facility, please see the end of this press release. "The third quarter was strategic on several fronts that we believe will support the continued long-term growth and health of our business – including record signings and installation activity, the repurchase of 500,000 common shares under our buy-back program and reaching key milestones in the coming launch of our pilot location-based virtual reality offering," said IMAXCEO Richard L. Gelfond. "In just the first nine months of the year, we signed a record 293 theatre agreements, the majority of which came from existing partners looking to expand their IMAXfootprint. As importantly, our accelerated install pace continued into the third quarter as well, with a record 48 new theatre installs–signaling continued demand from exhibitors to open their IMAX® theatres ahead of the highly anticipated upcoming film slate." **Network Update:**  During the quarter, the Company installed 50 theatres, of which 48 were for new theatre locations and 2 were upgrades. The Company also signed contracts for 162 theatres in the third quarter of 2016. The total IMAXtheatre network consisted of 1,145 systems as of Sept. 30, 2016, of which 1,037 were in commercial multiplexes. There were 547 theatres in backlog as of Sept. 30, 2016, up 23.8% from the 442 in backlog as of June 30, 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 $186.3 millionin the third quarter of 2016, compared with $189.8 millionin the prior-year period. The average global DMR box office per-screen average in the third quarter of 2016 was $184,700. "From a box office perspective, we were encouraged by a number of key markets - including the domestic market - which saw IMAXper screen averages rise 8% in the third quarter. While global box office overall was flat versus the third quarter of last year, box office is cyclical and we can expect periods that are stronger than others – such as the first five months of 2016. We anticipate box office will pick up again in the fourth quarter with titles such as Marvel's _Doctor Strange_, which includes more than an hour of footage specially formatted exclusively for IMAX, the Harry Potter spin-off _Fantastic Beasts and Where to Find Them_, and of course _Rogue One: A Star Wars Story_. With the anticipated strength of the tentpole-heavy film slate over the next 24 months coupled with the heightened demand from filmmakers to differentiate their movies using IMAX® cameras and the ideal content spacing, we believe we are well-positioned to take advantage of the years ahead." **Third-Quarter Segment Results** * Revenue from sales and sales-type leases was $21.8 millionin the third quarter of 2016, compared with $26.6 millionin the third quarter of 2015. The Company installed 15 full theatre systems under sales and sales-type lease arrangements in the most recent quarter, compared with the 12 full sales-type theatres installed in the third quarter of 2015. The Company also recognized 2 upgrades under sales and sales-type lease arrangements in the most recent quarter, compared to 8 in the same period last year. * Revenue from joint revenue-sharing arrangements was $19.7 millionin the quarter, compared with $19.8 millionin the prior-year period. During the quarter, the Company installed 33 new theatres under joint revenue-sharing arrangements, compared with 22 in the third quarter of 2015. The Company had 592 theatres operating under joint revenue-sharing arrangements as of Sept. 30, 2016, as compared to 498 joint revenue-sharing theatres one year prior.  * Production and DMR revenues were $21.5 millionin the third quarter of 2016, compared with $20.9 millionin the third quarter of 2015. As mentioned above, gross box office from DMR titles was $186.3 millionin the third quarter of 2016, compared with $189.8 millionin the prior-year period. The global DMR per screen average in the third quarter of 2016 was $184,700, compared with $220,500in same period last year. * Gross margin across all segments in the third quarter of 2016 was 51.9%, compared to 49.8% in the third quarter of 2015. * Operating expenses (which include SG&A and R&D, and excludes stock-based compensation) were $27.5 millionin the quarter, compared with $23.4 millionin the third quarter of 2015. "While we remain focused on our core business, in the third quarter we expanded our efforts to deliver differentiated entertainment experiences with the coming launch of our premium location-based VR offering, IMAX VR™," Gelfond said.  "I am pleased to report that we have already made significant progress on this initiative and have received strong interest for centre partnerships, content deals and many other opportunities that we hope to begin announcing over the coming months. While we are still in the early test phase of this effort, we are optimistic about VR and the potential sizeable opportunity that it presents our business." **Share Buybacks** The Company repurchased 500,000 shares in the third quarter of 2016. The Company purchased the shares at an average price of $29.32, for a total value of $14.7 million. The Company did not repurchase any shares in connection with the administration of the Company's long-term incentive plan in the third quarter of 2016. **Supplemental Earnings Materials **For more information about our results, please refer to the earnings slides posted on the IMAX Investor Relations website located at [www.imax.com/content/investor-relations](http://www.imax.com/content/investor-relations). **Investor Relations Website and Social Media** Beginning the week of October 24, 2016, and on a weekly basis thereafter, the Company intends to post quarter-to-date box office results on the IMAX Investor Relations website located at [www.imax.com/content/investor-relations](http://www.imax.com/content/investor-relations). The Company expects to provide such updates on Friday of each week, although the Company may change this timing without notice. Results will be displayed with a one week lag. In addition, the Company has created a new Twitter account: @IMAX\_IR. The Company intends to use Twitter to disclose the foregoing box office information, as well as other information that may be of interest to the Company's investor community. The information posted on the Company's website and/or via its Twitter account may be deemed material to investors. Accordingly, investors, media and others interested in the Company should monitor the Company's website and its Twitter account in addition to the Company's press releases, SECfilings and public conference calls and webcasts. **Conference Call **The Company will host a conference call today at 8:30 AM ET to discuss its third-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 6905161. A replay of the call will be available via webcast on the IMAX Investor Relations website located at [www.imax.com/content/investor-relations](http://www.imax.com/content/investor-relations)or via telephone by dialing (888) 203-1112 (US and Canada), or (647) 436-0148 (international). The Conference ID for the telephone replay is 6905161. **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 Sep. 30, 2016, there were 1,145 IMAXtheatres (1,037 commercial multiplexes, 16 commercial destinations and 92 institutions) in 74 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._ For additional information please contact: **_Investors: _**IMAX Corporation, New York Jessica Kourakos 212-821-0100 [jkourakos@imax.com](mailto:jkourakos@imax.com) Michael Mougias 212-821-0187 [mmougias@imax.com](mailto:mmougias@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** **Signings and Installations** **Three Months** **Ended September 30,** **Theater Signings:** **2016** **2015** Full new sales and sales-type lease arrangements 5 11 New joint revenue sharing arrangements 156 22 **Total new theaters** **161** **33** Upgrade of IMAX theater systems 1 2 **Total Theater Signings** **162** **35** **Three Months** **Ended September 30,** **Theater Installations:** **2016** **2015** Full new sales and sales-type lease arrangements 15 12 New joint revenue sharing arrangements 33 22 **Total new theaters** **48** **34** Upgrade of IMAX theater systems 2 (1) 10 (1) **Total Theater Installations** **50** **44** **As of September 30,** **Theater Backlogs:** **2016** **2015** New sales and sales-type lease arrangements 158 175 New joint revenue sharing arrangements 389 209 **Total new theaters** **547** (2)(3) **384** (2)(4) **As of September 30,** **Theater Network:** **2016** **2015** Commercial Multiplex Theaters: Sales and sales-type lease arrangements 445 389 Joint revenue sharing arrangements 592 498 **Total Commercial Multiplex Theaters** **1,037** **887** Commercial Destination Theaters 16 19 Institutional Theaters 92 102 **Total Theater Installations** **1,145** **1,008** \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (1)     Includes two installations of an upgrade to a laser-based digital system under sales and sales-type lease arrangements (2015 –  nine laser-based digital systems, seven under sales and sales-type lease arrangements, one under a short-term operating lease arrangement and one under a joint revenue sharing arrangement). (2)     Includes 20 laser-based digital theater system configurations (2015 – 69), including upgrades. The Company continues to develop and roll out its laser-based digital projection system. (3)     Includes five upgrades to a laser-based digital theater system, in existing IMAX theater locations. (4)     Includes 20 upgrades to a digital theater system, in existing IMAX theater locations (two xenon configurations and 18 laser configurations, of which four are under joint revenue sharing arrangements). **Additional Information (continued)** In addition to the 42 IMAX DMR films released to the IMAXtheater network during the first nine months ended September 30, 2016, 5 additional IMAX DMR films have been announced so far to be released in the remaining three months of 2016: * _Inferno_: _The_IMAX_Experience_(Sony Pictures, October 2016); * _Jack Reacher: Never Go Back_: _The_IMAX_Experience_(Paramount Pictures, October 2016); * _Doctor Strange: The_IMAX_Experience_(Walt Disney Studios, November 2016); * _Fantastic Beasts and Where to Find Them: The_IMAX_Experience_(Warner Bros. Pictures, November 2016); and * _Rogue One: A Star Wars Story_: _The_IMAX_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 24 titles to be released in 2017 to the IMAXtheater network: * _xXx: Return of Xander Cage: The_IMAX_Experience_ (Paramount Pictures, January 2017); * _Resident Evil: The Final Chapter: The_IMAX_Experience_ (Sony Pictures, February 2017); * _Attraction: The_IMAX_Experience_(Art Pictures Studio, January 2017, Russiaonly); * _The Lego Batman Movie: The_IMAX_Experience_(Warner Bros. Pictures, February 2017); * _The Great Wall: The_IMAX_Experience_(Legendary East Ltd., February 2017); * _Logan: The_IMAX_Experience_(20th Century Fox, March 2017); * _Kong: Skull Island: The_IMAX_Experience_(Warner Bros. Pictures, March 2017); * _Beauty and The Beast: The_IMAX_Experience_ (Walt Disney Studios, March 2017); * _Ghost in the Shell: The_IMAX_Experience_(Paramount Pictures, March 2017); * _Fast 8: The_IMAX_Experience_(Universal Pictures, April 2017); * _Guardians of the Galaxy Vol. 2: The_IMAX_Experience_(Walt Disney Studios, May 2017); * _Pirates of the Caribbean: Dead Men Tell No Tales: The_IMAX_Experience_(Walt Disney Studios, May 2017); * _Wonder Woman: The_IMAX_Experience_(Warner Bros. Pictures, June 2017); * _The Mummy: The_IMAX_Experience_(Universal Pictures, June 2017); * _Transformers: The Last Knight: The_IMAX_Experience_(Paramount Pictures, June 2017); * _Spider-Man: Homecoming: The_IMAX_Experience_(Sony Pictures\-distributed and Marvel Studios and Sony Pictures\- produced, July 2017); * _Dunkirk: The_IMAX_Experience_(Warner Bros. Pictures, July 2017); * _The Solutrean: The_IMAX_Experience_(Sony Pictures, September 2017); * _The Lego Ninjago Movie: The_IMAX_Experience_ (Warner Bros. Pictures, September 2017); * _Blade Runner 2049: The_IMAX_Experience_ (Warner Bros. Pictures, October 2017); * _Geostorm: The_IMAX_Experience_ (Warner Bros. Pictures, October 2017); * _Thor: Ragnarök: The_IMAX_Experience_(Walt Disney Studios, November 2017); * _Justice League: The_IMAX_Experience_(Warner Bros. Pictures, November 2017); and * _Star Wars: Episode VIII: The_IMAX_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 the number of IMAX DMR films to be released to the IMAXnetwork in 2017 will be similar to the 47 IMAX DMR films slated for release in 2016. **IMAX CORPORATION** **CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS** _(In thousands of U.S. dollars, except per share amounts)_ **_(Unaudited)_** **Three Months** **Nine Months** **Ended September 30,** **Ended September 30,** **2016** **2015** **2016** **2015** **Revenues** Equipment and product sales $ 30,835 $ 33,083 $ 81,064 $ 72,824 Services 37,195 33,024 122,853 115,698 Rentals 16,007 16,665 58,538 59,006 Finance income 2,288 2,329 6,991 6,803 Other 225 \- 975 141 **86,550** **85,101** **270,421** **254,472** **Costs and expenses applicable to revenues** Equipment and product sales 15,690 21,949 49,075 43,010 Services 20,393 15,899 58,517 50,201 Rentals 5,504 4,864 15,367 13,856 Other 64 \- 110 \- **41,651** **42,712** **123,069** **107,067** **Gross margin** **44,899** **42,389** **147,352** **147,405** Selling, general and administrative expenses 30,686 24,973 92,706 82,348 (including share-based compensation expense of $7.7 million and  $22.5 million for the three and nine months ended September 30, 2016, respectively (2015 - expense of $4.3 million and $14.9 million, respectively)) Research and development 4,460 2,722 11,603 9,611 Amortization of intangibles 531 429 1,537 1,302 Receivable provisions, net of recoveries 275 361 631 709 Asset impairments 1,223 245 1,223 245 Impairment of investments \- \- 194 350 **Income from operations** **7,724** **13,659** **39,458** **52,840** Interest income 370 222 1,217 727 Interest expense (469) (463) (1,325) (1,170) **Income from operations before income taxes** **7,625** **13,418** **39,350** **52,397** Provision for income taxes (2,551) (2,477) (9,635) (12,408) Loss from equity-accounted investments, net of tax (690) (427) (2,471) (1,610) **Net income** **4,384** **10,514** **27,244** **38,379** Less: net income attributable to non-controlling interests (1,859) (1,904) (7,401) (5,028) **Net income attributable to common shareholders** **$** **2,525** **$** **8,610** **$** **19,843** **$** **33,351** **Net income per share attributable to common shareholders - basic & diluted:** Net income per share – basic **$** **0.04** **$** **0.12** **$** **0.29** **$** **0.47** Net income per share – diluted **$** **0.04** **$** **0.12** **$** **0.29** **$** **0.46** Weighted average number of shares outstanding (000's): Basic 67,090 69,699 68,053 69,582 Fully Diluted 67,746 70,860 68,721 71,102 Additional Disclosure: Depreciation and amortization(1) $ 12,115 $ 10,467 $ 34,179 $ 31,191 (1) Includes $0.1 million and $0.4 million of amortization of deferred financing costs charged to interest expense for the three and nine months ended September 30, 2016, respectively (2015 - $0.3 million and $0.7 million, respectively). **IMAX CORPORATION** **CONDENSED CONSOLIDATED BALANCE SHEETS** _(In thousands of U.S. dollars)_ **_(Unaudited)_** **As at** **As at** **September 30** **December 31** **2016** **2015** **Assets** Cash and cash equivalents $ 218,104 $ 317,449 Accounts receivable, net of allowance for doubtful accounts of $1,026 (December 31, 2015 — $1,146) 89,247 97,981 Financing receivables 118,897 117,231 Inventories 51,015 38,753 Prepaid expenses 11,603 6,498 Film assets 15,165 14,571 Property, plant and equipment 233,984 218,267 Other assets 26,419 26,136 Deferred income taxes 26,233 26,666 Other intangible assets 29,605 28,950 Goodwill 39,027 39,027 **Total assets** **$** **859,299** **$** **931,529** **Liabilities** Bank indebtedness $ 27,806 $ 29,276 Accounts payable 16,733 23,455 Accrued and other liabilities 90,485 95,748 Deferred revenue 97,220 104,993 **Total liabilities** **232,244** **253,472** **Commitments and contingencies** **Non-controlling interests** **2,693** **3,307** **Shareholders' equity** Capital stock common shares — no par value. Authorized — unlimited number. 66,813,963 — issued and 66,813,787 — outstanding (December 31, 2015 — 69,673,244 — issued and outstanding) 435,829 448,310 Less: Treasury stock held in trust, 176 shares at cost (6) \- Other equity 180,358 168,425 Accumulated (deficit) earnings (43,816) 15,499 Accumulated other comprehensive loss (4,562) (7,443) **Total shareholders' equity attributable to common shareholders** **567,803** **624,791** Non-controlling interests 56,559 49,959 **Total shareholders' equity** **624,362** **674,750** **Total liabilities and shareholders' equity** **$** **859,299** **$** **931,529** **IMAX CORPORATION** **CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS** _(In thousands of U.S. dollars)_ **_(Unaudited)_** **Nine Months Ended September 30,** **2016** **2015** **Cash provided by (used in):** **Operating Activities** Net income $ 27,244 $ 38,379 Adjustments to reconcile net income to cash from operations: Depreciation and amortization 34,179 31,191 Write-downs, net of recoveries 2,903 2,928 Change in deferred income taxes (517) 5,097 Stock and other non-cash compensation 22,896 15,204 Unrealized foreign currency exchange (gain) loss (206) 716 Loss from equity-accounted investments 2,769 2,756 Gain on non-cash contribution to equity-accounted investees (298) (1,146) Investment in film assets (14,162) (12,069) Changes in other non-cash operating assets and liabilities (29,504) (41,033) **Net cash provided by operating activities** **45,304** **42,023** **Investing Activities** Purchase of property, plant and equipment (10,033) (38,443) Investment in joint revenue sharing equipment (25,524) (20,969) Investment in new business ventures \- (2,000) Acquisition of other intangible assets (2,931) (3,622) **Net cash used in investing activities** **(38,488)** **(65,034)** **Financing Activities** Increase in bank indebtedness \- 17,568 Repayment of bank indebtedness (1,500) \- Repurchase of common shares (100,378) (34,279) Settlement of restricted share units and options (8,376) (7,859) Common shares issued - stock options exercised 7,196 23,838 Taxes paid on secondary sale and repatriation dividend (2,991) \- Taxes withheld and paid on employee stock awards vested (230) (223) Treasury stock purchased for future settlement of restricted share units (6) (2,141) Credit facility amendment fees paid \- (1,310) 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** **(106,285)** **33,594** Effects of exchange rate changes on cash 124 275 **(Decrease) increase in cash and cash equivalents during period** **(99,345)** **10,858** **Cash and cash equivalents, beginning of period** **317,449** **106,503** **Cash and cash equivalents, end of period** $ **218,104** $ **117,361** **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 includes the design, manufacture, sale or lease of IMAX theater projection system equipment. The theater system maintenance segment includes the maintenance of IMAX theater projection system equipment in the IMAX theater network. The joint revenue sharing arrangements segment includes the provision of IMAX theater 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 IMAX theaters that the Company owns and operates, camera rentals and other miscellaneous items. **Three Months** **Nine Months** **Ended September 30,** **Ended September 30,** **2016** **2015** **2016** **2015** **Revenue** **IMAX Theater Systems** IMAX Systems Sales and sales-type leases $ 21,804 $ 26,635 $ 58,522 $ 53,924 Ongoing rent, fees, and finance income 3,883 3,518 11,986 10,708 Other 4,904 3,221 14,394 11,320 30,591 33,374 84,902 75,952 Theater System Maintenance 10,293 9,337 30,031 27,345 Joint Revenue Sharing Arrangements 19,698 19,797 66,940 67,259 **Film** Production and IMAX DMR 21,549 20,865 78,767 75,144 Film distribution and post-production 4,419 1,728 9,781 8,772 25,968 22,593 88,548 83,916 **Total** $ 86,550 $ 85,101 $ 270,421 $ 254,472 **Gross margins** **IMAX Theater Systems** IMAX systems(1) Sales and sales-type leases $ 12,936 $ 9,775 $ 26,795 $ 24,720 Ongoing rent, fees, and finance income 3,807 3,334 11,457 10,111 Other 69 (267) (251) (421) 16,812 12,842 38,001 34,410 Theater System Maintenance 3,398 3,521 10,207 9,891 Joint Revenue Sharing Arrangements(1) 10,980 12,130 44,716 46,816 **Film** Production and IMAX DMR(1) 12,448 13,929 52,398 55,642 Film distribution and post-production(1) 1,261 (33) 2,030 646 13,709 13,896 54,428 56,288 **Total** $ 44,899 $ 42,389 $ 147,352 $ 147,405 \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (1) IMAX systems include marketing and commission costs of $0.8 million and $1.9 million for the three and nine months ended September 30, 2016, respectively (2015 - $0.9 million and $1.8 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $1.4 million and $2.9 million for the three and nine months ended September 30, 2016, respectively (2015 - $1.3 million and $2.7 million, respectively). Production and DMR segment margins include marketing costs of $4.2 million and $11.7 million for the three and nine months ended September 30, 2016, respectively (2015 - $3.4 million and $8.3 million, respectively). Distribution segment margins include marketing expense of $0.6 million and $2.1 million for the three and nine months ended September 30, 2016, respectively (2015 - cost recovery 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 revenue 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 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 revenue 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, revenue, 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 September 30, 2016. The ratio of total debt to adjusted EBITDA was 0.21:1 as at September 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 $28.2 million. Adjusted EBITDA is calculated as follows: **For the** **For the** **3 months ended** **12 months ended** **September 30, 2016** **September 30, 2016** (1) **_(In thousands of U.S. Dollars)_** Net income $ 4,384 $ 53,489 Add (subtract): Loss from equity accounted investments 690 3,263 Provision for income taxes 2,551 17,279 Interest expense, net of interest income 99 358 Depreciation and amortization, including film asset amortization 11,984 45,036 Write-downs, net of recoveries including asset impairments and receivable provisions 1,654 3,700 Stock and other non-cash compensation 7,882 30,071 EBITDA before non-controlling interests 29,244 153,196 EBITDA attributable to non-controlling interests(2) (4,738) (20,006) EBITDA attributable to common shareholders $ 24,506 $ 133,190 Adjusted revenues attributable to common shareholders(3) $ 77,171 $ 350,657 Adjusted EBITDA margin 31.8% 38.0% \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (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. (3) **3 months ended September 2016** **12 months ended September 2016** Total revenues $        86,550 $ 389,754 Greater China revenues $      29,736 $  123,961 Non-controlling interest ownership percentage 31.54% 31.54% Deduction for non-controlling interest share of revenues (9,379) (39,097) Adjusted revenues attributable to common shareholders $        77,171 $ 350,657 **IMAX CORPORATION ****OTHER INFORMATION **_(in thousands of U.S. dollars)_ **_Adjusted Net Income and Adjusted Diluted Per Share Calculations – Quarter Ended September 30, 2016 vs. 2015:_** The Company reported net income of $4.4 million or $0.07 per basic and diluted share for the third quarter of 2016, as compared to net income of $10.5 million or $0.15 per basic share and $0.14 per diluted share for the third quarter of 2015. Net income for the third quarter of 2016 includes a $7.7 million charge or $0.11 per diluted share (2015 — $4.3 million or $0.06 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 $9.9 million or $0.15 per diluted share for the third quarter of 2016, as compared to adjusted net income of $13.9 million or $0.19 per diluted share for the third quarter of 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 $7.9 million or $0.12 per diluted share for the third quarter of 2016, as compared to adjusted net income attributable to common shareholders of $12.0 million or $0.17 per diluted share for the third 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 September 30,** **2016** **2015** **Net Income** **Diluted EPS** **Net Income** **Diluted EPS** Reported net income $ 4,384 $ 0.07 $ 10,514 $ 0.14 (1) Adjustments: Stock-based compensation 7,742 0.11 4,252 0.06 Tax impact on items listed above (2,210) (0.03) (901) (0.01) Adjusted net income 9,916 0.15 13,865 0.19 (1) Net income attributable to non-controlling interests (1,859) (0.03) (1,904) (0.02) Stock-based compensation (net of tax of less than $0.1  million) attributable to non-controlling interests (128) \- \- \- Adjusted net income attributable to common shareholders $ 7,929 $ 0.12 $ 11,961 $ 0.17 (1) Weighted average diluted shares outstanding 67,746 70,860 \_\_\_\_\_\_\_\_\_\_\_\_\_ (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 September 30, 2016 vs. 2015_** The Company reported net income of $27.2 million or $0.40 per basic and diluted share for the nine months ended September 30, 2016, as compared to net income of $38.4 million or $0.54 per basic share and $0.53 per diluted share for the nine months ended September 30, 2015. Net income for the nine months ended September 30, 2016 includes a $22.5 million charge or $0.32 per diluted share (2015 — $14.9 million or $0.21 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 $43.3 million or $0.63 per diluted share for the nine months ended September 30, 2016, as compared to adjusted net income of $50.7 million or $0.70 per diluted share for the nine months ended September 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 $35.5 million or $0.52 per diluted share for the nine months ended September 30, 2016, as compared to adjusted net income attributable to common shareholders of $45.7 million or $0.63 per diluted share for the nine months ended September 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: **Nine Months Ended September 30,** **2016** **2015** **Net Income** **Diluted EPS** **Net Income** **Diluted EPS** Reported net income $ 27,244 $ 0.40 $ 38,379 $ 0.53 (1) Adjustments: Stock-based compensation 22,485 0.32 14,930 0.21 Tax impact on items listed above (6,394) (0.09) (2,603) (0.04) Adjusted net income 43,335 0.63 50,706 0.70 (1) Net income attributable to non-controlling interests (7,401) (0.11) (5,028) (0.07) Stock-based compensation (net of tax of $0.1 million) attributable to non-controlling interests (421) \- \- \- Adjusted net income attributable to common shareholders $ 35,513 $ 0.52 $ 45,678 $ 0.63 (1) Weighted average diluted shares outstanding 68,721 71,102 \_\_\_\_\_\_\_\_\_\_\_\_\_ (1) Includes impact of $0.7 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** **Three months ended** **Nine months ended** **September 30, 2016** **September 30, 2016** **_(In thousands of U.S. Dollars)_** Net cash provided by operating activities $ 9,237 $ 45,304 Net cash used in investing activities (7,625) (38,488) Free cash flow $ 1,612 $ 6,816 Logo - [http://photos.prnewswire.com/prnh/20111107/MM01969LOGO](http://photos.prnewswire.com/prnh/20111107/MM01969LOGO) To view the original version on PR Newswire, visit:[http://www.prnewswire.com/news-releases/imax-corporation-reports-third-quarter-2016-financial-results-300348273.html](http://www.prnewswire.com/news-releases/imax-corporation-reports-third-quarter-2016-financial-results-300348273.html) SOURCE IMAX Corporation