IMAX Corporation Reports Second Quarter 2012 Financial Results

NEW YORK, July 26, 2012/PRNewswire/ --

HIGHLIGHTS

• Q2 2012 Revenues Increased 23% to $70.2 million
• Q2 2012 Adjusted Net Income Increased 206% to $14.1 million
• New Theatre Signings Momentum Leads to Increase in 2012 Scheduled Installations

IMAX Corporation(NYSE: IMAX; TSX: IMX) today reported second quarter 2012 revenues of $70.2 million, adjusted EBITDA as calculated in accordance with the Company's Credit Facility of $29.0 million, adjusted net income of $14.1 million, or $0.21per diluted share, and reported net income of $11.1 million, or $0.16per diluted share.  For reconciliations of adjusted net income to reported net income and for the definition of adjusted EBITDA, please see the tables at the end of this press release.

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"Our second quarter financial results reflect growth in recurring revenues and gross margin, driven by the power and scale of our global network and the solid performance of a portfolio of films," said IMAXChief Executive Officer Richard L. Gelfond. "In addition to our healthy box office results and our expanding network, during the quarter we signed deals for 40 IMAX® theatre systems, our backlog rose sequentially and our pipeline for future theatre deals remains robust.  We believe the fundamentals of our business are fueling our earnings growth and positioning us for success over the long term."

Network Growth Update
In the second quarter of 2012, the Company signed contracts for 40 theatre systems and installed 20 theatre systems.  Based on the number of recent theatre signings, the Company has increased its 2012 installations scheduled only from current backlog to approximately 110 new theatres, from its previous outlook of 95 to 100 new theatres from backlog.  In addition, the Company may sign agreements for new theatres that install within that same year.  The Company cautions that installations can slip from period to period, usually for reasons beyond its control.

There were 280 theatre systems in backlog as of June 30, 2012, compared to 261 systems in backlog as of March 31, 2012and 294 systems in backlog as of June 30, 2011.  For a breakdown of system signings, installations and backlog by type, please see the end of this press release.

Second Quarter Segment Results
Second quarter 2012 total film revenue was $26.5 million, compared to $18.7 millionin the second quarter of 2011.  Production and IMAX DMR® revenues were $19.7 millionin the second quarter of 2012, versus $12.4 millionin the year-ago period.  Gross box office from DMR titles was $173.5 millionin the second quarter of 2012, compared to $107.7 millionin the second quarter of 2011.  The average DMR box office per screen in the second quarter of 2012 was $341,900, compared to $315,700in the second quarter of 2011.

"Differentiation continues to be a key focus of our film strategy in 2012 and beyond," added Mr. Gelfond.  "Several recent titles have featured various elements of IMAXdifferentiation, including Prometheus andThe Amazing Spider-Man.  The highlight of our third quarter, Christopher Nolan's The Dark Knight Rises, includes a record of over 70-plus minutes of IMAXfootage. We believe that the success of this film will drive longer term benefits to our business like continued theatre signings momentum and interest in IMAXdifferentiation among filmmakers.  In 2013, we will achieve an exciting milestone with the release of two movies featuring sequences filmed with IMAXcameras, Paramount Pictures' sequel to Star Trekand Lionsgate's Catching Fire, the second installment of The Hunger Gamesseries."

In the second quarter of 2012, revenue from joint revenue sharing arrangements was $15.6 million, compared to $8.3 millionin the prior-year period.  During the quarter, the Company installed 9 new theatres under joint revenue sharing arrangements, compared to 23 in the year-ago period.  As of June 30, 2012, there were 274 IMAXtheatres operating under joint revenue sharing arrangements, compared to 204 joint revenue sharing theatres open as of June 30, 2011.

In the second quarter of 2012, IMAXsystems revenue was $18.0 million, compared to $20.5 millionin the second quarter of 2011, primarily reflecting the installation of 11 full, new theatre systems in the most recent second quarter, compared to a total of 18 systems installed in the second quarter of 2011, which included 11 full, new systems, one used system and six digital system upgrades.

Mr. Gelfond concluded, "Global demand for The IMAX Experience® is as strong as ever, as evidenced by our box office performance, our upcoming lineup of films and a robust pipeline of theatre deals.  We are still in the early stages of our network expansion, having recently increased the estimated number of worldwide IMAXzones by 10% to 1,700 theatres.  While we continue to grow at a rapid pace, we are also reinvesting in our brand and technology to even further differentiate the IMAXplatform, solidifying our position as the premier global blockbuster entertainment platform."

Second quarter 2012 total revenues were $70.2 million, adjusted EBITDA was $29.0 million, adjusted net income was $14.1 million, or $0.21per diluted share, and reported net income was $11.1 million, or $0.16per diluted share.  For the second quarter of 2011, total revenues were $57.2 million, adjusted net income was $4.6 million, or $0.07per diluted share, reported net income was $1.8 million, or $0.03per diluted share, and adjusted EBITDA was $16.2 million.  

For the six months ended June 30, 2012, total revenues were $125.8 million, adjusted EBITDA was $45.5 million, adjusted net income was $18.1 million, or $0.27per diluted share, and reported net income was $13.7 million, or $0.20per diluted share.  For the six months ended June 30, 2011, total revenues were $102.4 million, adjusted EBITDA was $25.2 million, adjusted net income was $7.1 million, or $0.10per diluted share, and reported net income was $0.8 million, or $0.01per diluted share.    

Adjusted Net Income and Adjusted Earnings Per Diluted Share Calculation – Beginning Quarter Ended September 30, 2012:
Beginning in the third quarter of 2012, the Company intends to adopt a revised definition of "Adjusted Net Income" and "Adjusted Earnings Per Diluted Share" to exclude all stock-based compensation and one-time items.  In addition, Adjusted Net Income and Adjusted Earnings Per Diluted Share will be fully tax-affected.  The Company believes that this revised definition should provide for a more straightforward and conventional calculation of adjusted earnings.

Conference Call
The Company will host a conference call today at 8:30 AM ETto discuss its second quarter 2012 financial results.  To access the call via telephone, interested parties should dial (866) 321-6651 approximately 5 to 10 minutes before it begins.  International callers should dial (416) 642-5212.  The participant passcode for the call is 5745205.  This call is also being webcast by Thomson Financialand can be accessed on the 'Investor Relations' section of www.imax.com.  A replay of the call will be available via webcast on the 'Investor Relations' section of www.imax.comor via telephone by dialing (888) 203-1112, or (647) 436-0148 for international callers.  The participant passcode for the telephone replay is 5745205.

About IMAX Corporation
IMAX Corporationis one of the world's leading entertainment and technology companies, specializing in the creation and delivery of premium, awe-inspiring entertainment experiences. With a growing suite of cutting-edge motion picture and sound technologies, and a globally recognized entertainment brand, IMAXis singularly situated at the convergence of the entertainment industry, innovation and the digital media world. The industry's top filmmakers and studios are utilizing IMAXtheatres to connect with audiences in extraordinary ways, and as such, the IMAXnetwork is among the most important and successful theatrical distribution platforms for major event films around the globe. The Company's new digital projection and sound systems - combined with a growing blockbuster film slate - are fueling the rapid expansion of the IMAXnetwork in established markets such as North America, Western Europe, and Japan, as well as emerging markets such as Chinaand Russia. IMAXdeliver the world's best cinematic presentations using proprietary IMAX®, IMAX3D®, and IMAX DMR® (Digital Re-Mastering) technologies. IMAX DMR enables virtually any motion picture to be transformed into the unparalleled image and sound quality of The IMAX Experience®.

IMAXis headquartered in New York, Torontoand Los Angeles, with offices in London, Tokyo, Shanghaiand Beijing.  As of June 30, 2012, there were 663 IMAXtheatres (529 commercial multiplex, 20 commercial destination and 114 institutional) in 52 countries.

IMAX®, IMAX® 3D, IMAX DMR®, Experience It In IMAX®, An IMAX 3D Experience®, The IMAX Experience® and IMAX Is Believing® are trademarks of IMAX Corporation. More information about the Company can be found at www.imax.com. You may also connect with IMAXon Facebook(www.facebook.com/imax), Twitter (www.twitter.com/imax) and YouTube(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, including the length and severity of the current economic downturn, the performance of IMAX DMR films, the opportunities that may be presented to and pursued by IMAX, competitive actions by other companies, conditions in the in-home and out-of home entertainment industries, the signing of theatre system agreements, changes in law or regulations, conditions, changes and developments in the commercial exhibition industry, the failure to respond to changes and advancements in digital technology, the failure to convert theatre system backlog into revenue, new business initiatives,investments and operations in foreign jurisdictions and any future international expansion, the inability to protect IMAX's intellectual property foreign currency fluctuations and IMAX's prior restatements and the related litigation.  These factors and other risks and uncertainties are discussed in IMAX's most recent Annual Report on Form 10-K and most recent Quarterly Reports on Form 10-Q.

For additional information please contact:

Additional Information

2012 DMR Films Announced to Date  

To date, IMAXhas announced 25 DMR titles that will be released in the IMAXtheatre network in 2012.  The Company expects the total number of titles in 2012 to be similar to that in 2011.  Films to run throughout the remainder of 2012 include:

• The Amazing Spider-Man: An IMAX3DExperience (Sony, July 2012);
• The Dark Knight Rises: TheIMAXExperience (WB, July 2012);
• Total Recall: TheIMAXExperience (Sony, August 2012, late-breaking select international markets only);
• The Bourne Legacy: TheIMAXExperience(Universal, August 2012, late-breaking select international markets only);
• Resident Evil: Retribution: An IMAX3DExperience (Sony, September 2012);
• Frankenweenie: An IMAX3DExperience (Disney, October 2012);
• Skyfall: The IMAXExperience (Sony, November 2012);
• Remembering 1942: The IMAXExperience(Huayi Brothers, November 2012, Asiaonly);
• CZ12: TheIMAXExperience(JCE Entertainment Ltd., Huayi Brothers& Emperor Motion Pictures, December 2012, Asiaonly); and
• The Hobbit: An Unexpected Journey: An IMAX3DExperience (WB, December 2012).

2013 DMR Films Announced to Date

To date, IMAXhas announced 7 titles to be released in 2013.

• Jack the Giant Killer: AnIMAX3D Experience (WB, March 2013);
• The Sequel to Star Trek: AnIMAX3D Experience(Paramount, May 2013);
• Man of Steel: TheIMAXExperience(WB, June 2013);
• Gravity: AnIMAX3D Experience (WB, September 2013);
• Stalingrad:An IMAX3D Experience(AR Films, October 2013, Russiaand the CIS only);
• The Hunger Games: Catching Fire: TheIMAXExperience(Lionsgate, November 2013); and
• The Hobbit: There and Back Again: An IMAX3DExperience(WB, December 2013).

The Company remains in discussions with virtually every major studio regarding future titles.  For periodic box office updates, please visit the corporate news section of www.imax.com. 

Theatre System Signings
In the second quarter of 2012, the Company signed contracts for 38 new theatre systems (28 under joint revenue sharing arrangements and 10 under sales and sales-type lease arrangements) and 2 digital upgrades, for a total of 40 theatre system signings. In the second quarter of 2011, the Company signed contracts for 39 new theatre systems (26 under joint revenue sharing arrangements and 13 under sales and sales-type lease arrangements) and 13 digital and other upgrades, for a total of 52 theatre system signings.

Through the first six months of 2012, the Company has signed contracts for 61 new theatre systems (33 under joint revenue sharing arrangements and 28 under sales and sales-type lease arrangements) and 2 digital upgrades, for a total of 63 theatre system signings.  Through the first six months of 2011, the Company signed contracts for 138 new theatre systems (102 under joint revenue sharing arrangements and 36 under sales and sales-type lease arrangements) and 15 digital upgrades, for a total of 153 theatre system signings.  

Theatre System Installations
In the second quarter of 2012, the Company installed 20 new theatre systems (9 under joint revenue sharing arrangements and 11 under sales and sales-type lease arrangements).  In the second quarter of 2011, the Company installed 34 new theatre systems (23 under joint revenue sharing arrangements and 11 under sales and sales-type lease arrangements), 1 used system under a sales and sales-type lease arrangement and 6 digital upgrades, for a total of 41 theatre system installations.

Through the first six months of 2012, the Company installed 36 new theatre systems (17 under joint revenue sharing arrangements and 19 under sales and sales-type lease arrangements) and 10 upgrades (9 digital), for a total of 46 theatre system installations.  Through the first six months of 2011, the Company installed 56 new theatre systems (33 systems under joint revenue arrangements and 23 sales and sales-type lease systems) and 28 digital upgrades, for a total of 84 theatre system installations.

Theatre System Backlog
As of June 30, 2012, the Company's theatre backlog consisted of 280 theatre systems (135 under joint revenue sharing arrangements and 145 under sales and sales-type lease arrangements, one of which was a system designated for a digital upgrade).  As of June 30, 2011, the Company's theatre backlog consisted of 294 systems (128 under joint revenue sharing arrangements and 166 under sales and sales-type lease arrangements, 12 of which were systems designated for digital upgrades).

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)

(1)  Includes less than $0.1 million and $0.1 millionof amortization of deferred financing costs charged to interest expense for the three and six months ended June 30, 2012, respectively (June 30, 2011- $0.2 million and $0.3 million, respectively).

IMAX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
In accordance with United States Generally Accepted Accounting Principles
(in thousands of U.S. dollars)

IMAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In accordance with United States Generally Accepted Accounting Principles
(In thousands of U.S. dollars)
(Unaudited)

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 is comprised of the design, manufacture, sale or lease IMAXtheater projection system equipment. The theater system maintenance segment consists of the maintenance of IMAXtheater projection system equipment in the IMAXtheater network. The joint revenue sharing arrangements segment is comprised of the installation IMAXtheater projection system equipment to an exhibitor in exchange for a certain percentage of box-office receipts, concession revenue and in some cases a small upfront or initial payment. The film production and IMAX DMR segment is comprised of the production of films and performance of film re-mastering services. The film distribution segment includes the distribution of films for which the Company has distribution rights. The film post-production segment includes the provision of film post-production and film print services. The other segment includes certain IMAXtheaters that the Company owns and operates, camera rentals and other miscellaneous items.

_________
(1)   IMAXsystems include commission costs of $0.5 millionand $1.2 millionfor the three and six months ended June 30, 2012, respectively (2011 - $0.1 millionand $0.8 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $0.7 millionand $1.0 millionfor the three and six months ended June 30, 2012, respectively (2011 - $1.8 millionand $2.3 million, respectively). Production and DMR segment margins include marketing costs of $1.1 millionand $1.7 millionfor the three and six months ended June 30, 2012, respectively (2011 - $0.7 millionand $1.2 million, respectively). Distribution segment margins include marketing costs of $0.4 millionand $1.2 millionfor the three and six months ended June 30, 2012, respectively (2011 - $1.4 millionand $1.6 million, respectively).

IMAX CORPORATION
OTHER INFORMATION
(in thousands of U.S. dollars)

Non-GAAP Financial Measures:

In this release, the Company presents adjusted EBITDA, adjusted net income and adjusted net income per diluted share as supplemental measures of performance of the Company, which are not recognized under United Statesgenerally accepted accounting principles ("GAAP"). The Company presents adjusted EBITDA, adjusted net income and adjusted net income per diluted share because it believes that they are important supplemental measures of its comparable controllable operating performance and it wants to ensure that its investors fully understand the impact of its 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, adjusted net income and adjusted net income per diluted share should be considered in addition to, and not as a substitute for, net income and other measures of financial performance reported in accordance with GAAP.

Adjusted EBITDA is calculated on a basis consistent with the Company's Credit Facility, which refers to Adjusted EBITDA as EBITDA. The Credit Facility provides that the Company will be required to maintain a ratio of funded debt (as defined in the Credit Agreement) to EBITDA (as defined in the Credit Agreement) of not more than 2:1.  The Company will also be required to maintain a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of not less than 1.1:1.0. At all times under the terms of the Credit Facility, the Company is required to maintain minimum Excess Availability of not less than $5.0 millionand minimum Cash and Excess Availability of not less than $15.0 million. The ratio of funded debt to EBITDA was 0.63:1 as at June 30, 2012, where Funded Debt (as defined in the Credit Agreement) is the sum of all obligations evidenced by notes, bonds, debentures or similar instruments and was $55.0 million. EBITDA is calculated as follows:

(1)   Ratio of funded debt calculated using twelve months ended EBITDA.

IMAX CORPORATION
OTHER INFORMATION
(in thousands of U.S. dollars)

Adjusted Net Income and Adjusted Diluted Per Share Calculations – Quarter Ended June 30, 2012vs. 2011:
The Company reported net income of $11.1 million or $0.17 per basic share and $0.16 per diluted share for the second quarter of 2012, as compared to a net income of $1.8 million or $0.03 per basic and diluted share for the second quarter of 2011. Net income for the quarter includes a deferred tax provision of $3.0 millionor $0.05per diluted share (2011 – $1.4 million or $0.02per diluted share). Net income for the second quarter of 2011 also includes a charge of $1.4 million or $0.02per diluted share for variable share-based compensation.  Adjusted net income, which consists of net income excluding the impact of variable share-based compensation and the deferred tax provision, was $14.1 millionor $0.21 per diluted share in the second quarter of 2012 as compared to adjusted net income of $4.6 millionor $0.07per diluted share for the second quarter of 2011.  A reconciliation of net income, the most directly comparable U.S. GAAP measure, to adjusted net income and adjusted net income per diluted share is presented in the table below:

Adjusted Net Income and Adjusted Diluted Per Share Calculations – Six Months Ended June 30, 2012vs. 2011:
The Company reported net income of $13.7 million or $0.21 per basic share and $0.20per diluted share for the six months ended June 30, 2012, as compared to net income of $0.8 million or $0.01per basic and diluted share for the six months ended June 30, 2011. Net income for the six months ended June 30, 2012includes a $0.8 millionpre-tax charge or $0.01 per diluted share (2011 – $3.2 million or $0.05per diluted share) for variable share-based compensation expense during the six months ended June 30, 2012and a deferred tax provision of $3.7 millionor $0.06per diluted share (2011 – $1.1 million or $0.01per diluted share). Net income for the six months ended June 30, 2011also includes a one-time $2.1 millionpre-tax charge ($0.03per diluted share) due to an arbitration award arising from an arbitration proceeding brought against the Company in connection with a discontinued subsidiary. Adjusted net income, which consists of net income excluding the impact of the variable share-based compensation expense, the charge for the arbitration award and the deferred tax provision was $18.1 million or $0.27 per diluted share in the six months ended June 30, 2012, as compared to adjusted net income of $7.1 millionor $0.10 per diluted share for the six months ended June 30, 2011. A reconciliation of net income, the most directly comparable U.S. GAAP measure, to adjusted net income and adjusted net income per diluted share is presented in the table below:

SOURCE IMAX Corporation