IMAX Corporation Reports First Quarter 2014 Financial Results
7:00 AM ET 4/24/14 | PR Newswire
IMAX Corporation (NYSE: IMAX; TSX: IMX) today reported first quarter 2014 revenues of $48.2 million, adjusted EBITDA as calculated in accordance with the Company's credit facility of $12.6 million, adjusted net income of $3.3 million, or $0.05 per diluted share, and reported net income of $0.6 million, or $0.01 per diluted share. http://photos.prnewswire.com/prnvar/20111107/MM01969LOGO
"We made significant progress towards our long-term goals this quarter through our multi-picture agreement with Disney and our recently announced transaction with investors in IMAX China. We also had a very strong signings quarter, with 36 new theatres signed, driven by a robust 23 signings in strategically-important Europe," said Richard L. Gelfond, IMAX CEO. "While first-quarter box office is traditionally the softest of the year, just a few weeks into the second quarter, we are encouraged by the strong international opening of The Amazing Spider-Man 2 - just one of the many highly anticipated movies in our portfolio of films for the remainder of year."
Network Growth Update
The total IMAX(R) theatre network consisted of 840 systems as of March 31, 2014, of which 707 were in commercial multiplexes. There were 431 theatres in backlog as of March 31, 2014, compared to 283 in backlog as of March 31, 2013. In the first quarter of 2014, the Company signed contracts for 36 theatres, of which 35 were for new locations and 1 was for an upgrade. In the quarter, the Company installed 10 theatres, of which 8 were for new theatre locations. For a breakdown of theatre system signings, installations, network and backlog by type, please see the end of this press release.
"The significant level of interest in our business worldwide is promising and underscores how the IMAX brand has become synonymous with the ultimate way to experience blockbuster films," stated Mr. Gelfond. "We are excited for what the future holds for IMAX. We believe that our network growth, the continued commitment from our partners and our consumers' enthusiasm globally, combined with our portfolio of films in 2014 and beyond, will continue to solidify our position as a unique and dominant player in the global entertainment industry."
First-Quarter Segment Results
-- Revenue from sales and sales-type leases was $4.5 million in the first quarter of 2014, compared to $9.8 million in the first quarter of 2013, primarily reflecting the installation of 3 full, new theatre systems under sales and sales-type lease arrangements in the most recent first quarter, compared to the 6 sales and sales-type theatres the Company installed in the first quarter of 2013. In addition, there were 2 digital system upgrades (1 sales-type and 1 joint revenue-sharing) in existing locations in the first quarter of 2014, compared to 7 upgrades (all sales-type) in the first quarter of 2013.
-- Revenue from joint revenue-sharing arrangements was $10.9 million in the quarter, compared to $9.4 million in the prior-year period. During the quarter, the Company installed 5 new theatres under joint revenue-sharing arrangements, compared to 4 in the year-ago period. The Company had 388 theatres operating under joint revenue-sharing arrangements as of March 31, 2014, as compared to 319 theatres one year prior.
-- Production and IMAX DMR(R) (Digital Re-Mastering) revenues were $15.2 million in the first quarter of 2014, compared to $14.4 million in the first quarter of 2013. Gross box office from DMR titles was $138.5 million in the first quarter of 2014, compared to $128.7 million in the prior-year period. The average global DMR box office per screen in the first quarter of 2014 was $197,000 compared to $212,900 in the prior-year period.
The Company will host a conference call today at 8:30 AM ET to discuss its first quarter 2014 financial results. To access the call via telephone, interested parties in the US and Canada should dial (800) 820-0231 approximately 5 to 10 minutes before it begins. International callers should dial (416) 640-5926. The participant passcode for the call is 2860379. 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 (888) 203-1112 (US and Canada), or (647) 436-0148 (international). The Conference ID for the telephone replay is 2860379.
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 March 31, 2014, there were 840 IMAX theatres (707 commercial multiplexes, 18 commercial destinations and 115 institutions) in 57 countries.
IMAX(R), IMAX(R) 3D, IMAX DMR(R), Experience It In IMAX(R), An IMAX 3D Experience(R), The IMAX Experience(R), IMAX Is Believing(R) and IMAX nXos(R) 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; the opportunities (or lack thereof) that may be presented to and pursued by the Company; the performance of IMAX DMR films; competitive actions by other companies; conditions in the in-home and out-of-home entertainment industries; the signing of theater system agreements; changes in laws or regulations; conditions, changes and developments in the commercial exhibition industry; the failure to convert theater system backlog into revenue; risks associated with investments and operations in foreign jurisdictions and any future international expansion, including those related to economic, political and regulatory policies of local governments and laws and policies of the United States and Canada; risks related to the Company's growth and operations in China; the failure to respond to change and advancements in digital technology; risks related to the acquisition of AMC Entertainment Holdings, Inc. by Dalian Wanda Group Co., Ltd.; risks related to new business initiatives; the potential impact of increased competition in the markets within which the Company operates; risks related to the Company's inability to protect the Company's intellectual property; risks related to Eastman Kodak bankruptcy and the possibility of constrained film supply; risks related to the Company's implementation of a new enterprise resource planning system; risks related to the Company's prior restatements and the related litigation; and other factors, many of which are beyond the control of the Company. These factors, other risks and uncertainties and financial details are discussed in IMAX's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
For additional information please contact:
Investors: Media: IMAX Corporation, New York IMAX Corporation, New York Teri Loxam Ann Sommerlath 212-821-0100 212-821-0155 firstname.lastname@example.org email@example.com Business Media: Entertainment Media: Sloane & Company, New York Principal Communications Group, Los Angeles Whit Clay Melissa Zuckerman/Paul Pflug 212-446-1864 323-658-1555 firstname.lastname@example.org email@example.com firstname.lastname@example.org
Additional Information Signings and Installations Mar. 31, 2014 Three Months Ended Mar. 31, Theatre Signings: 2014 2013 Full new sales and sales-type lease arrangements 32 (1) 14 (1) New joint revenue sharing arrangements 3 3 Total new theatres 35 17 Upgrades of IMAX theatre systems 1 8 (2)(3) Total Theatre Signings 36 25 Three Months Ended Mar. 31, Theatre Installations: 2014 2013 Full new sales and sales-type lease arrangements 3 6 New joint revenue sharing arrangements 5 4 Total new theatres 8 10 Upgrades of IMAX theatre systems 2 7 (2) Total Theatre Installations 10 17 As of Mar. 31, Theatre Backlog: 2014 2013 New sales and sales-type lease arrangements 151 135 New joint revenue sharing arrangements 257 136 Total new theatres 408 271 Upgrades of IMAX theatre systems 23 12 Total Theatres in Backlog 431 (4) 283 (5) As of Mar. 31, Theatre Network: 2014 2013 Commercial Multiplex Theatres: Sales and sales-type lease arrangements 319 287 Joint revenue sharing arrangements 388 319 Total Commercial Multiplex Theatres 707 606 Commercial Destination Theatres 18 19 Institutional Theatres 115 113 Total IMAX Theatre Network 840 738
(1) Includes three signings which replaced theaters under an existing arrangement in backlog (2013 - one). (2) Includes upgrades to xenon-based digital systems under short-term operating lease arrangements (2 signings, 2 installations). (3) Includes installation of laser-based digital systems in existing theater (2 signings). (4) Includes 23 upgrades to a digital theater system, in an existing IMAX theater location (3 xenon and 20 laser, of which 4 are under joint revenue sharing arrangements). (5) Includes 12 upgrades to a digital theater system, in an existing IMAX theater location (5 xenon and 7 laser).
Additional Information (continued)
2014 DMR Films:
To date, IMAX has announced 19 titles so far to be released in 2014. The Company released 38 titles in 2013. The Company remains in discussions with virtually every major studio regarding future titles and expects the total number of titles in 2014 to be similar to that in 2013.
-- Jack Ryan: Shadow Recruit: The IMAX Experience (Paramount Pictures, January 2014);
-- I, Frankenstein: An IMAX 3D Experience (Lionsgate, January 2014);
-- The Monkey King: The IMAX Experience (Global Star Productions, January 2014, China only);
-- Robocop: The IMAX Experience (Metro-Goldwyn-Mayer Studios, Inc., February 2014);
-- 300: Rise of an Empire: An IMAX 3D Experience (Warner Bros. Pictures, March 2014);
-- Need for Speed: An IMAX 3D Experience (Walt Disney Studios, March 2014, select international markets);
-- Divergent: The IMAX Experience (Summit Entertainment, March 2014);
-- Noah: The IMAX Experience (Paramount Pictures, March 2014);
-- Captain America: The Winter Soldier: An IMAX 3D Experience (Marvel Entertainment, April 2014);
-- Transcendence: The IMAX Experience (Warner Bros. Pictures, April 2014);
-- The Amazing Spider-Man 2: An IMAX 3D Experience (Sony Pictures, May 2014);
-- Godzilla: An IMAX 3D Experience (Warner Bros. Pictures, May 2014);
-- Maleficent: An IMAX 3D Experience (Walt Disney Studios, May 2014);
-- Edge of Tomorrow: An IMAX 3D Experience (Warner Bros. Pictures, June 2014);
-- How to Train Your Dragon 2: An IMAX 3D Experience (DreamWorks Animation, June 2014, select international markets);
-- Transformers: Age of Extinction: An IMAX 3D Experience (Paramount Pictures, June 2014);
-- Guardians of the Galaxy: An IMAX 3D Experience (Walt Disney Studios, August 2014);
-- Interstellar: The IMAX Experience (Paramount Pictures and Warner Bros. Pictures, November 2014); and
-- The Hobbit: There and Back Again: An IMAX 3D Experience (Warner Bros. Pictures, December 2014).
IMAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS In accordance with United States Generally Accepted Accounting Principles (In thousands of U.S. dollars, except per share amounts) (Unaudited) Three Months Ended March 31, 2014 2013 Revenues Equipment and product sales $ 6,354 $ 10,679 Services 28,872 26,656 Rentals 10,791 9,972 Finance income 2,180 1,984 Other - 375 48,197 49,666 Costs and expenses applicable to revenues Equipment and product sales 3,719 5,059 Services 14,350 14,964 Rentals 3,720 3,453 Other - - 21,789 23,476 Gross margin 26,408 26,190 Selling, general and administrative expenses 21,312 19,661 (including share-based compensation expense of $3.2 million for the three months ended March 31, 2014 (2013 - expense of $2.8 million)) Gain on curtailment of postretirement benefit plan - (2,185) Research and development 3,599 3,634 Amortization of intangibles 402 364 Receivable provisions, net of recoveries 287 - Income from operations 808 4,716 Interest income 16 13 Interest expense (266) (345) Income from operations before income taxes 558 4,384 Provision for income taxes (72) (1,203) Loss from equity-accounted investments, net of tax (262) (220) Income from continuing operations 224 2,961 Net income (loss) from discontinued operations, net of tax 355 (100) Net income $ 579 $ 2,861 Net income per share - basic & diluted: Net income per share from continuing operations $ - $ 0.04 Net income per share from discontinued operations 0.01 - $ 0.01 $ 0.04 Weighted average number of shares outstanding (000's): Basic 67,908 66,646 Fully Diluted 69,321 68,690 Additional Disclosure: Depreciation and amortization(1) $ 7,555 $ 8,591
(1) Includes $0.1 million of amortization of deferred financing costs charged to interest expense for the three months ended March 31, 2014, respectively (2013 - $0.1 million).
IMAX CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS In accordance with United States Generally Accepted Accounting Principles (in thousands of U.S. dollars) (Unaudited) As at As at March 31, December 31, 2014 2013 Assets Cash and cash equivalents $ 29,692 $ 29,546 Accounts receivable, net of allowance for doubtful accounts of $838 (December 31, 2013 -- $887) 59,942 73,074 Financing receivables 103,752 107,110 Inventories 13,798 9,825 Prepaid expenses 4,641 3,602 Film assets 6,714 7,076 Property, plant and equipment 141,875 132,847 Other assets 27,173 27,034 Deferred income taxes 24,402 24,259 Other intangible assets 27,230 27,745 Goodwill 39,027 39,027 Total assets $ 478,246 $ 481,145 Liabilities Accounts payable $ 14,319 $ 19,396 Accrued and other liabilities 57,745 65,232 Deferred revenue 83,409 76,932 Total liabilities 155,473 161,560 Commitments and contingencies Shareholders' equity Capital stock, common shares -- no par value. Authorized -- unlimited number. Issued and outstanding -- 67,957,167 (December 31, 2013 -- 67,841,233) 328,685 327,313 Other equity 38,216 36,452 Accumulated deficit (42,472) (43,051) Accumulated other comprehensive loss (1,656) (1,129) Total shareholders' equity 322,773 319,585 Total liabilities and shareholders' equity $ 478,246 $ 481,145
IMAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS In accordance with United States Generally Accepted Accounting Principles (In thousands of U.S. dollars) (Unaudited) Three Months Ended March 31, 2014 2013 Cash provided by (used in): Operating Activities Net income $ 579 $ 2,861 Net (income) loss from discontinued operations (355) 100 Adjustments to reconcile net income to cash from operations: Depreciation and amortization 7,555 8,591 Write-downs, net of recoveries 518 - Change in deferred income taxes (75) 904 Stock and other non-cash compensation 3,281 3,000 Gain on curtailment of postretirement benefit plan - (2,185) Unrealized foreign currency exchange loss 646 189 Loss from equity-accounted investments 346 220 Investment in film assets (1,888) (3,866) Changes in other non-cash operating assets and liabilities 2,755 (10,703) Net cash provided by (used in) operating activities from discontinued operations 572 (100) Net cash provided by (used in) operating activities 13,934 (989) Investing Activities Purchase of property, plant and equipment (7,927) (3,315) Investment in joint revenue sharing equipment (5,506) (8,717) Acquisition of other intangible assets (287) (778) Net cash used in investing activities (13,720) (12,810) Financing Activities Common shares issued - stock options exercised 742 2,485 Settlement of restricted share units (789) - Increase in bank indebtedness - 12,000 Repayment of bank indebtedness - (5,000) Credit facility amendment fees paid - (1,881) Net cash (used in) provided by financing activities (47) 7,604 Effects of exchange rate changes on cash (21) 17 Increase (decrease) in cash and cash equivalents during the period 146 (6,178) Cash and cash equivalents, beginning of period 29,546 21,336 Cash and cash equivalents, end of period $ 29,692 $ 15,158
IMAX CORPORATION SELECTED FINANCIAL DATA In accordance with United States Generally Accepted Accounting Principles (in thousands of U.S. dollars) The Company has seven reportable segments identified by category of product sold or service provided: IMAX systems; theater system maintenance; joint revenue sharing arrangements; film production and IMAX DMR; film distribution; film post-production; and other. The IMAX systems segment designs, manufactures, sells or leases IMAX theater projection system equipment. The theater system maintenance segment maintains IMAX theater projection system equipment in the IMAX theater network. The joint revenue sharing arrangements segment provides IMAX theater projection system equipment to an exhibitor in exchange for a share of box-office and concession revenues. The film production and IMAX DMR segment produces films and performs film re-mastering services. The film distribution segment distributes films for which the Company has distribution rights. The film post-production segment provides film post-production and film print services. The other segment includes certain IMAX theaters that the Company owns and operates, camera rentals and other miscellaneous items.
Three Months Ended March 31, 2014 2013 Revenue IMAX Theater Systems IMAX Systems Sales and sales-type leases $ 4,507 $ 9,796 Ongoing rent, fees, and finance income 3,253 2,942 Other 1,512 1,780 9,272 14,518 Theater system maintenance 8,195 7,789 Joint revenue sharing arrangements 10,856 9,376 Film Production and IMAX DMR 15,185 14,355 Film distribution and post-production 4,689 3,628 19,874 17,983 Total $ 48,197 $ 49,666 Gross margins IMAX Theater Systems IMAX systems(1) Sales and sales-type leases $ 1,659 $ 5,284 Ongoing rent, fees, and finance income 3,114 2,907 Other (438) (198) 4,335 7,993 Theater system maintenance 3,001 3,054 Joint revenue sharing arrangements(1) 7,283 6,159 Film Production and IMAX DMR(1) 11,074 9,213 Film distribution and post-production 715 (229) 11,789 8,984 Total $ 26,408 $ 26,190
(1) IMAX systems include marketing and commission costs of $0.2 million for the three months ended March 31, 2014 (2013 -- $0.3 million). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $0.2 million for the three months ended March 31, 2014 (2013 -- $0.2 million). Production and DMR segment margins include marketing costs of $1.1 million for the three months ended March 31, 2014 (2013 -- $0.9 million). Distribution segment margins include marketing costs of $0.2 million for the three months ended March 31, 2014 (2013 -- $0.1 million).
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 States generally 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 stock-based compensation (net of any related tax impact) 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 Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of not less than 1.1:1. The Company will also be required to maintain minimum EBITDA (as defined in the Credit Agreement) of $90.0 million on December 31, 2014, which requirement increases to $100.0 million on December 31, 2015. The Company must also maintain a Maximum Total Leverage Ratio (as defined in the Credit Agreement) of 2.00:1 on December 31, 2014, which requirement decreases to 1.75:1 on December 31, 2015. The ratio of total debt to EBITDA was nil:1 as at March 31, 2014, where Total Debt (as defined in the Credit Agreement) is the sum of all obligations evidenced by notes, bonds, debentures or similar instruments and was $nil. EBITDA is calculated as follows:
3 months ended 12 months ended March 31, 2014 March 31, 2014 (In thousands of U.S Dollars) Net income $ 579 $ 41,833 Add: Loss from equity accounted investments 262 2,799 Provision for income taxes(1) 289 15,607 Interest expense, net of interest income 250 1,209 Depreciation and amortization, including film asset amortization 7,424 35,616 Write-downs net of recoveries including asset impairments and receivable provisions 518 1,854 Stock and other non-cash compensation 3,281 12,966 $ 12,603 $ 111,884
(1) Includes a tax provision in discontinued operations of $0.2 million and $0.1 million for the three and twelve months ended March 31, 2014, respectively.
IMAX CORPORATION OTHER INFORMATION (in thousands of U.S. dollars) Adjusted Net Income and Adjusted Diluted Per Share Calculations - Quarter Ended March 31, 2014 vs. 2013: The Company reported net income of $0.6 million or $0.01 per basic and diluted share for the first quarter of 2014, as compared to net income of $2.9 million or $0.04 per basic share and diluted share for the first quarter of 2013. Net income for the first quarter of 2014 includes a $3.2 million charge, or $0.05 per diluted share, for stock-based compensation (2013 - $2.8 million or $0.04 per diluted share). Adjusted net income, which consists of net income excluding stock-based compensation expense and the related tax impact, was $3.3 million, or $0.05 per diluted share, in the first quarter of 2014, as compared to adjusted net income of $5.6 million, or $0.08 per diluted share, for the first quarter of 2013. 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 March 31, 2014 March 31, 2013 Net Income Diluted EPS Net Income Diluted EPS Reported net income $ 579 $ 0.01 $ 2,861 $ 0.04 Adjustments: Stock-based compensation 3,188 0.05 2,808 0.04 Tax expense on items listed above (515) (0.01) (105) - Adjusted net income $ 3,252 $ 0.05 $ 5,564 $ 0.08 Weighted average diluted shares outstanding 69,321 68,690
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 3 months ended March 31, 2014 (In thousands of U.S. Dollars) Net cash provided by operating activities $ 13,934 Net cash (used in) investing activities (13,720) Free cash flow $ 214
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SOURCE IMAX Corporation