Investors:

IMAX Corporation, New York

Teri Loxam

212-821-0100

tloxam@imax.com

Business Media:

Sloane & Company, New York

Whit Clay

212-446-1864

wclay@sloanepr.com

Media:

IMAX Corporation, New York

Ann Sommerlath

212-821-0155

asommerlath@imax.com

Entertainment Media:

Principal Communications Group, Los Angeles

Melissa Zuckerman/Paul Pflug

323-658-1555

melissa@pcommgroup.com

paul@pcommgroup.com

Signings and Installations

September 30, 2014

Three Months

Ended September 30,

Theater Signings:

2014

2013

Full new sales and sales-type lease arrangements

22

6

⁽³⁾

New joint revenue sharing arrangements

14

82

  Total new theaters

36

88

Upgrades of IMAX theater systems

6

⁽¹⁾⁽²⁾

11

⁽¹⁾⁽²⁾

Total Theater Signings

42

99

Three Months

Ended September 30,

Theater Installations:

2014

2013

Full new sales and sales-type lease arrangements

6

6

⁽⁴⁾

New joint revenue sharing arrangements

14

13

  Total new theaters

20

19

Upgrades of IMAX theater systems

-

9

⁽²⁾

Total Theater Installations

20

28

As of September 30,

Theater Backlog:

2014

2013

New sales and sales-type lease arrangements

169

142

New joint revenue sharing arrangements

244

191

  Total new theaters

413

333

Upgrades of IMAX theater systems

26

23

Total Theaters in Backlog

439

⁽⁵⁾⁽⁶⁾

356

⁽⁵⁾⁽⁷⁾

As of September 30,

Theater Network:

2014

2013

Commercial Multiplex Theaters:

Sales and sales-type lease arrangements

329

302

Joint revenue sharing arrangements

422

351

Total Commercial Multiplex Theaters

751

653

Commercial Destination Theaters

19

19

Institutional Theaters

110

113

Total IMAX Theater Network

880

785

(1)

Includes one signing for the installation of a laser-based digital system in an existing theater location (2013 – six signings).

(2)

Includes one signing of an upgrade to a xenon-based digital system under a short-term operating lease arrangement (2013 – 4 signings, 3 installations).

(3)

Includes one signing which replaced a theater under an existing arrangement in backlog.

(4)

Includes one full xenon-based digital system under a short-term operating lease arrangement.

(5)

 Includes 69 laser theater system configurations (2013 – 18), including upgrades.

(6)

Includes 26 upgrades to a digital theater system, in an existing IMAX theater location (3 xenon and 23 laser, of which 4 are under joint revenue sharing arrangements).

(7)

Includes 23 upgrades to a digital theater system, in an existing IMAX theater location (5 xenon and 18 laser, of which 3 are under joint revenue sharing arrangements).

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,

2014

2013

2014

2013

Revenues 

Equipment and product sales 

$

11,765

$

9,623

$

37,621

$

40,649

Services 

33,199

28,826

101,813

97,001

Rentals 

13,646

10,987

42,278

38,782

Finance income 

2,132

2,071

6,372

6,079

Other 

-

-

-

375

60,742

51,507

188,084

182,886

Costs and expenses applicable to revenues 

Equipment and product sales  

6,041

4,086

19,126

20,561

Services  

14,788

15,910

46,318

53,361

Rentals 

4,471

4,059

12,996

11,687

25,300

24,055

78,440

85,609

Gross margin 

35,442

27,452

109,644

97,277

Selling, general and administrative expenses  

23,513

19,778

68,323

61,549

(including share-based compensation expense of $3.4 million and $11.3 million
for the three and nine months ended September 30, 2014 (2013 - expense of
$2.8 million and $8.8 million, respectively)) 

Gain on curtailment of postretirement benefit plan 

-

-

-

(2,185)

Research and development 

4,560

3,974

11,468

11,267

Amortization of intangibles 

441

409

1,259

1,146

Receivable provisions, net of recoveries 

26

224

642

279

Impairment of available-for-sale investment 

-

-

650

-

Income from operations 

6,902

3,067

27,302

25,221

Interest income 

149

14

189

39

Interest expense 

(269)

(315)

(803)

(1,008)

Income from operations before income taxes 

6,782

2,766

26,688

24,252

Provision for income taxes 

(1,188)

(685)

(6,667)

(6,701)

Loss from equity-accounted investments, net of tax 

(297)

(344)

(721)

(998)

Income from continuing operations 

5,297

1,737

19,300

16,553

Net (loss) income from discontinued operations, net of tax 

-

(128)

355

(267)

Net income 

$

5,297

$

1,609

$

19,655

$

16,286

Less: Net income attributable to non-controlling interests 

(439)

-

(911)

-

Net income attributable to Common Shareholders 

$

4,858

$

1,609

$

18,744

$

16,286

Net income per share - basic: 

Net income per share from continuing operations 

$

0.07

$

0.02

$

0.26

$

0.24

Net income per share from discontinued operations 

-

-

0.01

-

$

0.07

$

0.02

$

0.27

$

0.24

Net income per share - diluted: 

Net income per share from continuing operations 

$

0.07

$

0.02

$

0.26

$

0.24

Net income per share from discontinued operations 

-

-

0.01

-

$

0.07

$

0.02

$

0.27

$

0.24

Weighted average number of shares outstanding (000's): 

Basic 

68,480

67,309

68,206

66,969

Fully Diluted 

69,602

69,116

69,597

68,853

Additional Disclosure: 

Depreciation and amortization⁽¹⁾

$

7,992

$

8,826

$

23,937

$

29,027

- 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, 2014, respectively (2013 - $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,

2014

2013

(unaudited)

Assets

Cash and cash equivalents

$

93,705

$

29,546

Accounts receivable, net of allowance for doubtful accounts of $714 (December 31, 2013 — $887)

59,734

73,074

Financing receivables

103,616

107,110

Inventories

21,439

9,825

Prepaid expenses

5,382

3,602

Film assets

7,787

7,076

Property, plant and equipment

161,579

132,847

Other assets

20,197

27,034

Deferred income taxes

20,917

24,259

Other intangible assets

27,556

27,745

Goodwill

39,027

39,027

Total assets

$

560,939

$

481,145

Liabilities

Accounts payable

$

16,571

$

19,396

Accrued and other liabilities

55,841

65,232

Deferred revenue

100,304

76,932

Total liabilities

172,716

161,560

Commitments and contingencies

Non-controlling interest

38,187

-

Shareholders' equity

Capital stock common shares — no par value. Authorized — unlimited number.

    Issued and outstanding — 68,520,049 (December 31, 2013 — 67,841,233)

334,415

327,313

Other equity

43,200

36,452

Accumulated deficit

(26,545)

(43,051)

Accumulated other comprehensive loss

(1,034)

(1,129)

Total shareholders' equity

350,036

319,585

Total liabilities and shareholders' equity

$

560,939

$

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)

Nine Months

Ended September 30,

2014

2013

Cash provided by (used in):

Operating Activities

Net income

$

19,655

$

16,286

Net (income) loss from discontinued operations

(355)

267

Adjustments to reconcile net income to cash from operations:

Depreciation and amortization

23,937

29,027

Write-downs, net of recoveries

1,753

279

Change in deferred income taxes

3,157

5,579

Stock and other non-cash compensation

11,609

9,348

Gain on curtailment of postretirement benefit plan

-

(2,185)

Unrealized foreign currency exchange loss

847

275

Loss from equity-accounted investments

1,073

998

Gain on non-cash contribution to equity-accounted investees

(352)

-

Investment in film assets

(8,398)

(16,772)

Changes in other non-cash operating assets and liabilities

18,372

(9,860)

Net cash provided by (used in) operating activities from discontinued operations

572

(267)

Net cash provided by operating activities

71,870

32,975

Investing Activities

Purchase of property, plant and equipment

(24,686)

(6,167)

Investment in joint revenue sharing equipment

(15,908)

(16,363)

Investment in new business ventures

(2,500)

(2,500)

Acquisition of other intangible assets

(1,979)

(1,812)

Net cash used in investing activities

(45,073)

(26,842)

Financing Activities

Issuance of subsidiary shares to non-controlling interests

40,491

-

Share issuance costs from the issuance of subsidiary shares to non-controlling interests

(3,556)

-

Common shares issued - stock options exercised

3,672

6,745

Repurchase of common shares

(2,369)

-

Settlement of restricted share units

(790)

-

Increase in bank indebtedness

-

12,000

Repayment of bank indebtedness

-

(18,000)

Credit facility amendment fees paid

-

(2,089)

Share issuance expenses

-

(202)

Net cash provided by (used in) financing activities

37,448

(1,546)

Effects of exchange rate changes on cash

(86)

32

Increase in cash and cash equivalents during the period

64,159

4,619

Cash and cash equivalents, beginning of period

29,546

21,336

Cash and cash equivalents, end of period

$

93,705

$

25,955

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

Nine Months

Ended September 30,

Ended September 30,

2014

2013

2014

2013

Revenue 

IMAX Theater Systems 

IMAX Systems 

Sales and sales-type leases 

$

6,644

$

6,419

$

25,629

$

33,321

Ongoing rent, fees, and finance income 

3,501

3,483

10,272

10,111

Other 

3,165

1,995

8,407

7,344

13,310

11,897

44,308

50,776

Theater system maintenance 

8,516

8,103

25,384

23,844

Joint revenue sharing arrangements 

15,238

11,960

45,457

39,672

Film 

Production and IMAX DMR 

18,350

14,547

57,585

54,854

Film distribution and post-production 

5,328

5,000

15,350

13,740

23,678

19,547

72,935

68,594

Total 

$

60,742

$

51,507

$

188,084

$

182,886

Gross margins 

IMAX Theater Systems 

IMAX systems⁽¹⁾

Sales and sales-type leases 

$

4,246

$

3,928

$

14,161

$

16,390

Ongoing rent, fees, and finance income 

3,352

3,277

9,799

9,758

Other 

(218)

(108)

(202)

375

7,380

7,097

23,758

26,523

Theater system maintenance 

3,208

3,218

8,990

9,432

Joint revenue sharing arrangements⁽¹⁾

9,382

7,153

30,043

26,796

Film 

Production and IMAX DMR⁽¹⁾

13,469

8,596

43,177

32,744

Film distribution⁽¹⁾ and post-production 

2,003

1,388

3,676

1,782

15,472

9,984

46,853

34,526

Total 

$

35,442

$

27,452

$

109,644

$

97,277

(1)  IMAX systems include marketing and commission costs of $0.3 million and $1.2 million for the three and nine months ended September 30, 2014, respectively (2013 — $0.2 million and $0.9 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $0.9 million and $2.1 million for the three and nine months ended September 30, 2014, respectively (2013 — $0.9 million and $2.0 million, respectively). Production and DMR segment margins include marketing costs of $2.1 million and $5.3 million for the three and nine months ended September 30, 2014, respectively (2013 — $0.8 million and $3.1 million, respectively). Distribution segment margins include marketing costs of $0.3 million and $0.7 million for the three and nine months ended September 30, 2014, respectively (2013 — $0.1 million and $0.2 million, respectively).

IMAX CORPORATION

OTHER INFORMATION

(in thousands of U.S. dollars)

Non-GAAP Financial Measures:

In this release, the Company presents adjusted EBITDA attributable to common shareholders, 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 United States generally accepted accounting principles ("GAAP"). The Company presents adjusted EBITDA 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 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 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 EBITDA 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, net income and other measures of financial performance reported in accordance with GAAP.

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 September 30, 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:

For the

For the 

3 months ended

12 months ended 

EBITDA per Credit Facility:  

September 30, 2014

September 30, 2014⁽¹⁾

(In thousands of U.S. Dollars) 

Net income 

$

5,297

$

47,484

Add (subtract):  

Loss from equity accounted investments 

297

2,480

Provision for income taxes 

1,188

16,790

Interest expense, net of interest income 

120

936

Depreciation and amortization, including film asset amortization 

7,861

31,553

Write-downs net of recoveries including asset impairments and receivable 

     provisions 

174

2,810

Stock and other non-cash compensation 

3,519

14,946

EBITDA attributable to non-controlling interests⁽²⁾

(887)

(1,776)

$

17,569

$

115,223

(1)

Ratio of total debt calculated using twelve months ended EBITDA 

(2)

The EBITDA calculation specified for purposes of the minimum EBITDA covenant excludes the reduction in EBITDA from the Company's non-controlling interests. 

IMAX CORPORATION

OTHER INFORMATION

(in thousands of U.S. dollars)

Adjusted Net Income and Adjusted Diluted Per Share Calculations – Quarter Ended September 30, 2014 vs. 2013:

The Company reported net income attributable to common shareholders of $4.9 million or $0.07 per basic and diluted share for the third quarter of 2014, as compared to $1.6 million or $0.02 per basic and diluted share for the third quarter of 2013. Net income attributable to common shareholders for the third quarter of 2014 includes a $3.4 million charge, or $0.04 per diluted share (after-tax), for stock-based compensation (2013 - $2.8 million or $0.04 per diluted share (after-tax)). Adjusted net income attributable to common shareholders, which consists of net income attributable to common shareholders excluding stock-based compensation expense and the related tax impact, was $7.8 million, or $0.11 per diluted share, in the third quarter of 2014, as compared to adjusted net income attributable to common shareholders of $4.4 million, or $0.06 per diluted share, for the third quarter of 2013. A reconciliation of net income attributable to common shareholders, the most directly comparable U.S. GAAP measure, to adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share is presented in the table below:

September 30, 2014

September 30, 2013

Net Income

Diluted EPS

Net Income

Diluted EPS

Reported net income attributable to common shareholders

$

4,858

$

0.07

⁽¹⁾

$

1,609

$

0.02

Adjustments:

Stock-based compensation

3,425

0.05

2,838

0.04

Tax impact of items listed above

(464)

(0.01)

(85)

-

Adjusted net income attributable to common shareholders

$

7,819

$

0.11

⁽¹⁾

$

4,362

$

0.06

Weighted average diluted shares outstanding

69,602

69,116

(1) Includes impact of $0.1 million of accretion charges associated with redeemable common stock.

Adjusted Net Income and Adjusted Diluted Per Share Calculations – Nine Months Ended September 30, 2014 vs. 2013:

The Company reported net income attributable to common shareholders of $18.7 million or $0.27 per basic and diluted share for the nine months ended September 30, 2014, as compared to $16.3 million or $0.24 per basic and diluted share for the nine months ended September 30, 2013. Net income attributable to common shareholders for the nine months ended September 30, 2014 includes a $11.3 million charge, or $0.13 per diluted share (after-tax), for stock-based compensation (2013 – $8.8 million or $0.12 per diluted share (after-tax)). Adjusted net income attributable to common shareholders, which consists of net income attributable to common shareholders excluding stock-based compensation expense and the related tax expense, was $28.3 million, or $0.40 per diluted share, in the nine months ended September 30, 2014, as compared to adjusted net income attributable to common shareholders of $24.9 million, or $0.36 per diluted share, for the nine months ended September 30, 2013. A reconciliation of net income attributable to common shareholders, the most directly comparable U.S. GAAP measure, to adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share is presented in the table below:

September 30, 2014

September 30, 2013

Net Income

Diluted EPS

Net Income

Diluted EPS

Reported net income attributable to common shareholders

$

18,744

$

0.27

⁽¹⁾

$

16,286

$

0.24

Adjustments:

Stock-based compensation

11,328

0.16

8,772

0.12

Tax expense of items listed above

(1,807)

(0.03)

(159)

-

Adjusted net income attributable to common shareholders

$

28,265

$

0.40

⁽¹⁾

$

24,899

$

0.36

Weighted average diluted shares outstanding

69,597

68,853

(1) Includes impact of $0.3 million of accretion charges associated with redeemable common stock.

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

9 months ended

September 30, 2014

(In thousands of U.S. Dollars)

Net cash provided by operating activities

$

71,870

Net cash used in investing activities

(45,073)

Free cash flow

$

26,797