IMAX Corporation Reports Third Quarter 2012 Financial Results

LOS ANGELES, Oct. 25, 2012 /CNW/ -

HIGHLIGHTS

• Operating leverage of business drives strong financial results
• Q3 2012 Revenues increased 20% to $80.7 million
• Adjusted EPS increased 86% to $0.26 and Adjusted EBITDA grew 59% to $34.0 million in the third quarter
• Free Cash Flow generation of $30.3 million in the quarter
• Maintaining full year 2012 install guidance of approximately 110 new theatre installations and issuing full year 2013 guidance of 110 to 125 new theatre installations

IMAX Corporation (NYSE: IMAX; TSX: IMX) today reported strong financial results for the third quarter of 2012 driven by operating leverage and continued theatre network growth globally, with 41 signings and 33 theatre installations in the quarter. Third quarter 2012 revenues were $80.7 million, adjusted EBITDA as calculated in accordance with the Company's Credit Facility was $34.0 million, adjusted net income was $17.9 million, or $0.26 per diluted share, and reported net income was $15.0 million, or $0.22 per diluted share. For reconciliations of adjusted net income to reported net income and for the definition of adjusted EBITDA and free cash flow, please see the tables at the end of this press release.

(Logo: http://photos.prnewswire.com/prnh/20111107/MM01969LOGO )

"Our strong quarterly financial results once again demonstrate how much the IMAX business model has evolved," said IMAX Chief Executive Officer Richard L. Gelfond. "We believe IMAX has become a story of growth and operating leverage, and our pipeline for future theatre deals remains robust. Our view is that we have reached a point of critical mass where our portfolio approach to our film slate combined with our global network expansion is driving scalability in the business."

"We are also seeing an increase in demand from filmmakers who want to take advantage of our differentiation opportunities, whether it be using our IMAX cameras, or specially formatting their movies for IMAX, or using an early release window in IMAX to further promote their film," Gelfond continued. "This ability to work closely with studios and directors, taken together with our strong brand and our end-to-end approach to our business, continues to set us apart and positions us well to create a unique experience that consumers cannot get anywhere else."

Third Quarter Segment Results

• IMAX posted third quarter 2012 revenues of $80.7 million, compared to $67.5 million in the same period last year
• IMAX systems revenue was $25.4 million in the quarter, compared to $20.6 million in the third quarter of 2011, primarily reflecting the installation of 14 full, new theatre systems under sales and sales-type lease arrangements in the most recent third quarter, compared to 11 full, new theatre systems in the third quarter of 2011. The Company also installed 3 digital system upgrades under sales or sales-type lease arrangements in the third quarter of 2012, compared to 4 upgrades in the third quarter of 2011
• Revenue from joint revenue sharing arrangements increased 31.9% to $13.2 million, compared to $10.0 million in the prior-year period. During the quarter, the Company installed 14 new theatres under joint revenue sharing arrangements, compared to 14 in the year-ago period. The Company ended the third quarter of 2012 with 287 theatres operating under joint revenue sharing arrangements, as compared to 218 theatres at the end of the third quarter of 2011
• Production and IMAX DMR® (Digital Re-Mastering) revenues increased 35.6% to $25.2 million in the third quarter of 2012 from $18.6 million in the third quarter of 2011. Gross box office from DMR titles was $173.2 million in the third quarter of 2012, compared to $149.5 million in the third quarter of 2011. The average DMR box office per screen in the third quarter of 2012 was $311,700, compared to $355,500 in the third quarter of 2011

Network Growth and Guidance Update

In the third quarter of 2012, the Company signed contracts for 41 theatres, of which 32 were new systems, and installed 33 theatres, of which 28 were new systems and 5 were digital upgrades.

The Company continues to expect that approximately 110 new theatre systems (excluding digital upgrades) will be installed during the full year of 2012, which implies that approximately 46 new theatre systems (excluding digital upgrades) will be installed in the fourth quarter of 2012. The Company updated its annual installation guidance to a more comprehensive definition which includes scheduled installations from backlog as well as the Company's estimate of installations from arrangements that will sign and install within a given year. Under this definition, the Company is issuing installation guidance for 2013 of an estimated 110 to 125 new theatre systems (excluding digital upgrades). The Company cautions that theatre system installations can slip from period to period in the course of the Company's business, usually for reasons beyond its control.

The total IMAX® theatre network consisted of 689 systems at the end of the quarter, of which 556 were in commercial multiplexes. There were 285 theatre systems in backlog as of Sept. 30, 2012, compared to 280 theatre systems in backlog as of June 30, 2012 and 295 systems in backlog as of Sept. 30, 2011. For a breakdown of theatre system signings, installations and backlog by type, please see the end of this press release.

"We believe that IMAX's fundamentals have never been stronger," Gelfond concluded. "The healthy level of business activity is evidenced by our signings and installations this quarter, and we continue to be encouraged by the pace and quality of discussions regarding future theatre deals. IMAX has created a truly differentiated brand and entertainment offering that is being embraced by exhibitors, studios, filmmakers, and - most importantly - by moviegoers around the world."

Conference Call
The Company will host a conference call today at 8:30 AM ET to discuss its third quarter 2012 financial results. To access the call via telephone, interested parties should dial [phone] approximately 5 to 10 minutes before it begins. International callers should dial [phone]. The participant passcode for the call is 9337410. This call is also being webcast by Thomson Financial and 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.com or via telephone by dialing [phone], or [phone] for international callers. The participant passcode for the telephone replay is 9337410.

About IMAX Corporation
IMAX, an innovator in entertainment technology, combines proprietary software, architecture and equipment to create experiences that take you beyond the edge of your seat to a world you've never imagined. Top filmmakers and studios are utilizing IMAX theatres to connect with audiences in extraordinary ways, and, as such, IMAX's network is among the most important and successful theatrical distribution platforms for major event films around the globe.

IMAX is headquartered in New York, Toronto and Los Angeles, with offices in London, Tokyo, Shanghai and Beijing. As of Sept. 30, 2012, there were 689 IMAX theatres (556 commercial multiplex, 20 commercial destination and 113 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 IMAX on 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 IMAX management's assumptions and existing information and involve certain risks and uncertainties which could cause actual results to differ materially from future results expressed or implied by such forward looking statements. Important factors that could affect these statements include, but are not limited to, general economic, market or business conditions; including the length and severity of the current economic downturn, the opportunities (or lack thereof) that may be presented to and pursued by the Company; the performance of IMAX DMR films; competitive actions by other companies; conditions in the in-home and out-of-home entertainment industries; the signing of theater system agreements; changes in laws or regulations; conditions, changes and developments in the commercial exhibition industry; the failure to convert theater system backlog into revenue; the failure to respond to change and advancements in digital technology; risks related to the acquisition of AMC Entertainment Holdings, Inc. by Dalian Wanda Group Co., Ltd.; risks related to the Company's implementation of a new enterprise resource planning ("ERP") system; risks related to new business initiatives; risks associated with investments and operations in foreign jurisdictions and any future international expansion, including those related to economic, political and regulatory policies of local governments and laws and policies of the United States and Canada; the potential impact of increased competition in the markets within which the Company operates; risks related to the Company's inability to protect the Company's intellectual property; risks related to foreign currency transactions; risks related to the Company's prior restatements and the related litigation; and other factors, many of which are beyond the control of the Company. These factors 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, IMAX has announced 31 DMR titles that will be released in the IMAX theatre network in 2012. Films to run throughout the remainder of 2012 include:

• Paranormal Activity 4: The IMAX Experience (Paramount Pictures, October 2012);
• Tai Chi Hero: An IMAX 3D Experience (Huayi Brothers, October 2012, Asia only);
• Cloud Atlas: The IMAX Experience (WB, October 2012);
• Skyfall: The IMAX Experience (Sony, November 2012);
• The Twilight Saga: Breaking Dawn - Part 2: The IMAX Experience (Lionsgate, November 2012, UK and select international markets only)
• Back to 1942: The IMAX Experience (Huayi Brothers, November 2012, Asia only);
• CZ12: The IMAX Experience (JCE Entertainment Ltd., Huayi Brothers & Emperor Motion Pictures, December 2012, Asia only); and
• The Hobbit: An Unexpected Journey: An IMAX 3D Experience (WB, December 2012).

2013 DMR Films Announced to Date:
To date, IMAX has announced 10 titles to be released in 2013. The Company remains in discussions with virtually every major studio regarding future titles and expects the total number of titles in 2013 to be similar to that in 2012.

• Hansel & Gretel: Witch Hunters: An IMAX 3D Experience (Paramount, January 2013);
• Jack the Giant Killer: An IMAX 3D Experience (WB, March 2013);
• Oblivion: The IMAX Experience (Universal, April 2013);
• Star Trek: Into Darkness: An IMAX 3D Experience (Paramount, May 2013);
• Man of Steel: The IMAX Experience (WB, June 2013);
• Gravity: An IMAX 3D Experience (WB, September 2013);
• Stalingrad: An IMAX 3D Experience (AR Films, October 2013, Russia and the CIS only);
• The Hunger Games: Catching Fire: The IMAX Experience (Lionsgate, November 2013);
• The Hobbit: The Desolation of Smaug: An IMAX 3D Experience (WB, December 2013); and
• Dhoom 3: The IMAX Experience (Yash Raj Films, 2013, India only).

Theatre Network Details:

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
Theatre System Signings:	2012		2011		2012		2011
Full new sales and sales-type lease arrangements	4		10		32		46
New joint revenue sharing arrangements	28		18		61		120
Total new theatres	32		28		93		166
Upgrades of IMAX theatre systems	9	^(1)	2		11		17
Total Theatre Signings	41		30		104		183
	Three Months				Nine Months
	Ended September 30,				Ended September 30,
Theatre System Installations:	2012		2011		2012		2011
Full new sales and sales-type lease arrangements	14		11		33		33
New joint revenue sharing arrangements	14		14		31		47
Total new theatres	28		25		64		80
Upgrades and other	5		4		15		33
Total Theatre Installations	33		29		79		113
	As of
	September 30,
Theatre Backlog:	2012		2011
New sales and sales-type lease arrangements	133		137
New joint revenue sharing arrangements	149		148
Total new theatres	282		285
Upgrades under sales and sales-type lease arrangements	3		10
Total Theatres in Backlog	285		295

__________
(1)	Includes three IMAX theatres acquired from another existing customer that had been operating under a joint revenue sharing arrangement. These theaters were purchased from the Company under a sales arrangement.

IMAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS In accordance with United States Generally Accepted Accounting Principles (In thousands of U.S. dollars, except per share amounts) (Unaudited)
		Three Months						Nine Months
		Ended September 30,						Ended September 30,
		2012			2011			2012			2011
Revenues
Equipment and product sales		$	24,327		$	18,378		$	55,756		$	58,359
Services			40,316			35,104			102,312			80,371
Rentals			14,013			11,350			42,912			25,416
Finance income			2,055			1,581			5,537			4,409
Other			-			1,075			-			1,325
			80,711			67,488			206,517			169,880
Costs and expenses applicable to revenues
Equipment and product sales			10,652			8,083			27,727			28,595
Services			21,107			19,113			55,378			48,015
Rentals			4,202			3,468			12,968			9,478
Other			-			386			-			406
			35,961			31,050			96,073			86,494
Gross margin			44,750			36,438			110,444			83,386
Selling, general and administrative expenses			19,326			19,440			58,713			55,778
	(including share-based compensation expense of $2.8 million and $10.3 million for the three and nine months ended September 30, 2011, respectively (2011 – expense of $0.5 million and $9.0 million, respectively))
Provision for arbitration award			-			-			-			2,055
Research and development			2,528			2,041			7,623			6,026
Amortization of intangibles			166			113			532			341
Receivable provisions, net of recoveries			241			408			829			767
Asset impairments			-			8			-			8
Impairment of available-for-sale investment			-			-			150			-
Income from operations			22,489			14,428			42,597			18,411
Interest income			22			13			73			44
Interest expense			(373)			(431)			(1,375)			(1,425)
Income from continuing operations before income taxes			22,138			14,010			41,295			17,030
Provision for income taxes			(6,814)			(5,179)			(11,599)			(6,504)
Loss from equity-accounted investments			(334)			(439)			(1,038)			(1,312)
Net income		$	14,990		$	8,392		$	28,658		$	9,214
Net income per share - basic & diluted:
	Net income per share - basic	$	0.23		$	0.13		$	0.44		$	0.14
	Net income per share - diluted	$	0.22		$	0.12		$	0.42		$	0.14
Weighted average number of shares outstanding (000's):
	Basic		65,930			64,654			65,718			64,406
	Fully Diluted		68,301			67,756			68,187			68,110
Additional Disclosure:
Depreciation and amortization^(1)		$	8,038		$	5,838		$	24,704		$	18,020

__________
(1)	Includes less than $0.1 million and $0.1 million of amortization of deferred financing costs charged to interest expense for the three and nine months ended September 30, 2012, respectively (September 30, 2011 — less than $0.1 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)
	As at			As at
	September 30,			December 31,
	2012			2011
	(unaudited)
Assets
Cash and cash equivalents	$	29,450		$	18,138
Accounts receivable, net of allowance for doubtful accounts of $1,636 (December 31, 2011 — $1,840)		36,147			46,659
Financing receivables		91,533			86,714
Inventories		20,841			19,747
Prepaid expenses		4,081			3,126
Film assets		3,488			2,388
Property, plant and equipment		109,115			101,253
Other assets		25,480			14,238
Deferred income taxes		40,164			50,033
Goodwill		39,027			39,027
Other intangible assets		27,709			24,913
Total assets	$	427,035		$	406,236
Liabilities
Bank indebtedness	$	30,000		$	55,083
Accounts payable		15,389			28,985
Accrued and other liabilities		63,405			54,803
Deferred revenue		79,660			74,458
Total liabilities		188,454			213,329
Commitments, contingencies and guarantees
Shareholders' equity
Capital stock, common shares — no par value. Authorized — unlimited number.
Issued and outstanding — 65,997,319 (December 31, 2011 — 65,052,740)		310,105			303,395
Other equity		26,587			17,510
Deficit		(97,008)			(125,666)
Accumulated other comprehensive loss		(1,103)			(2,332)
Total shareholders' equity		238,581			192,907
Total liabilities and shareholders' equity	$	427,035		$	406,236

IMAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In accordance with United States Generally Accepted Accounting Principles
(In thousands of U.S. dollars)
(Unaudited)
		Nine Months
		Ended September 30,
		2012					2011
Cash provided by (used in):
Operating Activities
Net income		$	28,658				$		9,214
Adjustments to reconcile net income to cash from operations:
	Depreciation and amortization		24,704						18,020
	Write-downs, net of recoveries		1,516						841
	Change in deferred income taxes		9,545						5,694
	Stock and other non-cash compensation		10,781						9,595
	Provision for arbitration award		-						2,055
	Unrealized foreign currency exchange (gain) loss		(152)						4,270
	Loss from equity-accounted investments		1,038						1,312
	Gain on non-cash contribution to equity-accounted investees		-						(404)
Investment in film assets			(13,508)						(8,814)
Changes in other non-cash operating assets and liabilities			(8,672)						(48,192)
	Net cash provided by (used in) operating activities		53,910						(6,409)
Investing Activities
Purchase of property, plant and equipment			(2,599)						(4,409)
Investment in joint revenue sharing equipment			(15,174)						(22,432)
Investment in new business ventures			(381)						(1,571)
Acquisition of other intangible assets			(5,046)						(4,008)
	Net cash used in investing activities		(23,200)						(32,420)
Financing Activities
Increase in bank indebtedness			9,917						59,583
Repayment of bank indebtedness			(35,000)						(37,500)
Credit facility amendment fees paid			-						(297)
Common shares issued - stock options exercised			5,831						5,635
	Net cash (used in) provided by financing activities		(19,252)						27,421
Effects of exchange rate changes on cash			(146)						(139)
Increase (decrease) in cash and cash equivalents during the period			11,312						(11,547)
Cash and cash equivalents, beginning of period			18,138						30,390
Cash and cash equivalents, end of period		$	29,450				$		18,843

IMAX CORPORATION
SELECTED FINANCIAL DATA
In accordance with United States Generally Accepted Accounting Principles
(in thousands of U.S. dollars)

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

		Three Months						Nine Months
		Ended September 30,						Ended September 30,
		2012			2011			2012			2011
Revenue
IMAX systems
Sales and sales-type leases		$	21,937		$	17,593		$	49,751		$	54,758
Ongoing rent, fees, and finance income			3,421			3,056			9,312			8,620
			25,358			20,649			59,063			63,378
Theater system maintenance			7,042			6,348			20,878			18,270
Joint revenue sharing arrangements			13,186			9,995			40,477			22,382
Films
	Production and IMAX DMR		25,223			18,600			58,805			38,280
	Distribution		3,259			4,965			11,122			12,857
	Post-production		1,646			3,023			5,778			5,686
			30,128			26,588			75,705			56,823
Other			4,997			3,908			10,394			9,027
Total		$	80,711		$	67,488		$	206,517		$	169,880
Gross margins
IMAX systems^(1)
Sales and sales-type leases		$	12,575		$	10,329		$	25,259		$	28,163
Ongoing rent, fees, and finance income			3,381			2,965			9,216			8,306
			15,956			13,294			34,475			36,469
Theater system maintenance			2,828			1,944			8,122			6,912
Joint revenue sharing arrangements^(1)			9,286			6,733			28,340			13,792
Films
	Production and IMAX DMR^(1)		15,426			12,015			35,714			21,235
	Distribution^(1)		587			1,418			2,133			2,531
	Post-production		103			808			1,373			2,804
			16,116			14,241			39,220			26,570
Other			564			226			287			(357)
Total		$	44,750		$	36,438		$	110,444		$	83,386

__________

(1)

IMAX systems include commission costs of $0.9 million and $2.1 million for the three and nine months ended September 30, 2012, respectively (2011 — $0.6 million and $1.4 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $1.1 million and $2.1 million for the three and nine months ended September 30, 2012, respectively (2011 — $1.3 million and $3.6 million, respectively). Production and DMR segment margins include marketing costs of $0.5 million and $2.2 million for the three and nine months ended September 30, 2012, respectively (2011 — $0.7 million and $1.9 million, respectively). Distribution segment margins include a marketing cost recovery of less than $0.1 million and an expense of $1.2 million for the three and nine months ended September 30, 2012, respectively (2011 — expense of $0.1 million and $1.7 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, adjusted net income per diluted share and free cash flow as supplemental measures of performance of the Company, which are not recognized under United States generally accepted accounting principles ("GAAP"). The Company presents adjusted EBITDA, adjusted net income, adjusted net income per diluted share, and free cash flow 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 and a provision for an arbitration award (net of any related 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, adjusted net income per diluted share and free cash flow 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:

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 million and minimum Cash and Excess Availability of not less than $15.0 million. The ratio of funded debt to EBITDA was 0.30:1 as at September 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 $30.0 million. EBITDA is calculated as follows:

		For the			For the
		3 months ended			12 months ended
		September 30, 2012			September 30, 2012^(1)
(In thousands of U.S. Dollars)
Net income		$	14,990		$	34,987
Add:
	Loss from equity accounted investments		334			1,517
	Provision for income taxes		6,814			14,483
	Interest expense, net of interest income		351			1,691
	Depreciation and amortization, including film asset amortization		7,995			31,676
	Write-downs net of recoveries including asset impairments and receivable provisions		597			2,629
	Stock and other non-cash compensation		2,930			13,621
Adjusted EBITDA		$	34,011		$	100,604

__________
(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 September 30, 2012 vs. 2011:

The Company reported net income of $15.0 million or $0.23 per basic share and $0.22 per diluted share for the third quarter of 2012, as compared to net income of $8.4 million or $0.13 per basic share and $0.12 per diluted share for the third quarter of 2011. Net income for the third quarter of 2012 includes a $2.8 million charge, or $0.04 per diluted share, for stock-based compensation (2011 - $0.5 million or $0.01 per diluted share) and the related tax benefit of $0.1 million (2011 - $0.5 million or $0.01 per diluted share). Adjusted net income, which consists of net income excluding stock-based compensation expense and the related tax benefit, was $17.9 million, or $0.26 per diluted share, in the third quarter of 2012, as compared to adjusted net income of $9.5 million, or $0.14 per diluted share, for the third 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:

		Three Months Ended						Three Months Ended
		September 30, 2012						September 30, 2011
		Net Income			Diluted EPS			Net Income			Diluted EPS
Reported		$	14,990		$	0.22		$	8,392		$	0.12
Adjustments:
	Stock-based compensation		2,756			0.04			519			0.01
	Tax benefit of items listed above		114			-			549			0.01
Adjusted		$	17,860		$	0.26		$	9,460		$	0.14
Weighted average diluted shares outstanding						68,301						67,756

Adjusted Net Income and Adjusted Diluted Per Share Calculations – Nine Months Ended September 30, 2012 vs. 2011:

The Company reported net income of $28.7 million or $0.44 per basic share and $0.42 per diluted share for the nine months ended September 30, 2012, as compared to net income of $9.2 million or $0.14 per basic and diluted share for the nine months ended September 30, 2011. Net income for the nine months ended September 30, 2012 includes a $10.3 million charge, or $0.15 per diluted share (2011 – $9.0 million or $0.13 per diluted share), for stock-based compensation. Net income for the nine months ended September 30, 2011 also includes a one-time $2.1 million pre-tax charge ($0.03 per 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 stock-based compensation expense, the charge for the arbitration award and the related tax impact, was $38.8 million, or $0.57 per diluted share, in the nine months ended September 30, 2012, as compared to adjusted net income of $19.4 million, or $0.28 per diluted share, for the nine months ended September 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:

		Nine Months						Nine Months
		Ended September 30, 2012						Ended September 30, 2011
		Net Income			Diluted EPS			Net Income			Diluted EPS
Reported		$	28,658		$	0.42		$	9,214		$	0.14
Add:
	Stock-based compensation		10,252			0.15			8,973			0.13
	Provision for arbitration award		-			-			2,055			0.03
	Tax impact on items listed above		(86)			-			(882)			(0.02)
Adjusted		$	38,824		$	0.57		$	19,360		$	0.28
Weighted average diluted shares outstanding						68,187						68,110

Free Cash Flow:

Free cash flow is defined as cash provided by operating activities minus cash used in investing activities (from the consolidated statements of cash flows). Cash provided by operating activities consist of net income, plus depreciation and amortization, plus the change in deferred income taxes, plus other non-cash items, plus changes in working capital, less investment in film assets, plus other changes in operating assets and liabilities. Cash used in investing activities includes capital expenditures, acquisitions and other cash used in investing activities. Management views free cash flow, a non-GAAP measure, as a measure of the Company's after-tax cash flow available to reduce debt, add to cash balances, and fund other financing activities. A reconciliation of cash provided by operating activities to free cash flow is presented in the table below:

		For the			For the
		Three Months Ended			Nine Months Ended
		September 30, 2012			September 30, 2012
(In thousands of U.S. Dollars)
Net cash provided by operating activities		$	34,067		$	53,910
Net cash (used in) investing activities			(3,797)			(23,200)
Free cash flow		$	30,270		$	30,710

SOURCE: IMAX Corporation

http://www.imax.com

http://photos.prnewswire.com/prnh/20111107/MM01969LOGO

PRN Photo Desk, [email protected]