IMAX CORPORATION
Exhibit 99.1
IMAX CORPORATION
2525 Speakman Drive
Mississauga, Ontario, Canada L5K 1B1
Tel: (905) 403-6500 Fax: (905) 403-6450
www.imax.com
IMAX CORPORATION
2525 Speakman Drive
Mississauga, Ontario, Canada L5K 1B1
Tel: (905) 403-6500 Fax: (905) 403-6450
www.imax.com
IMAX CORPORATION REPORTS THIRD QUARTER FINANCIAL RESULTS
— Pursuing Key Initiatives
Designed to Grow Business and Shareholder Value over Long Term —
TORONTO — November 8, 2006 — IMAX Corporation (NASDAQ: IMAX; TSX: IMX) today reported that primarily because it did not install any theatre systems in the third quarter ended September 30, 2006, it incurred a net loss of $0.30 per diluted share for the three month period. The Company emphasized, however, that it has during the recently completed quarter signed five theatre deals, bringing the year-to-date total to 25, including four of which remain subject to conditions. For the 2005 third quarter, the Company had net earnings of $0.05 per diluted share.
IMAX Co-Chief Executive Officers Richard L. Gelfond and Bradley J. Wechsler emphasized, “While the third quarter results are disappointing, we are making progress with what we are confident are the appropriate strategic initiatives to grow the business profitably and build shareholder value over the long term. Specifically, we have begun the important transition to a digital IMAX system and are accelerating our joint venture investment strategy, the objectives both being to help substantially expand the worldwide IMAX network and achieve attractive economics for the Company.”
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In addition to the slipping of installations, the Company’s 2006 third quarter performance was affected by the disappointing box office performance ofAnt Bully, and higher than anticipated SG&A due to increased legal expenses and costs related to the Company’s previously reported process of exploring strategic alternatives.
Messrs. Gelfond and Wechsler stated, “We strongly view the introduction of a digital IMAX system in 2008 as being potentially very beneficial to the Company. Although we face challenges in managing the transition to digital, we expect it to enable us to virtually eliminate IMAX print costs and allow operators and studios enhanced flexibility in their programming options. Moreover, by accelerating the Company’s involvement in box office sharing arrangements with exhibitors in which we contribute the projection systems (“joint ventures”), IMAX should be in a position to generate greater recurring revenues. Through a greater emphasis on joint ventures, the Company should realize benefits from deployment of capital, the expansion of its network, and in the incremental revenues and profitability that IMAX drives both for studios and the exhibitors.”
For the three months ended September 30, 2006, the Company’s total revenues were $20.7 million. Systems revenue was $7.3 million, as the Company recognized revenue on the sale of one theatre system in the third quarter of 2006. For the same 2005 period, IMAX had total revenues of $33.4 million and systems revenue of $20.2 million, as the Company recognized revenue on six theatre systems which qualified as either sales or sales-type leases in the prior year period. There were no revenues associated with consensual buyouts, terminations by default and MPX conversion agreements in the third quarter of 2006. This compares to $2.4 million in such settlement revenues in the third quarter of fiscal 2005.
For the third quarter of 2006, film revenues were $7.7 million, including IMAX DMR revenues of $3.4 million, theatre operations revenue was $4.7 million and other revenue was $1.0 million. For the 2005 third quarter, film revenues were $8.0 million, including IMAX DMR revenues of $3.0 million, theatre operations revenue was $4.3 million and other revenue was $0.8 million.
The Company ended the third quarter of fiscal 2006 with $26.2 million in cash, cash equivalents and short term investments.
The Company stated that it expects to install between five and eight theatre systems during the fourth quarter of fiscal 2006. This expectation reflects the impact of an unusually high number of installation slippages. Six systems currently in backlog were originally expected to be installed in the fourth quarter of fiscal 2006 but are now likely to be installed in fiscal 2007 instead. At the present time the Company has 24 systems in backlog scheduled for installation in 2007 and an additional eight systems that could be installed as early as December of that year. The Company went on to caution that slippages remain a recurring and unpredictable part of its business.
“Our clients are currently being impacted by slower than expected theatre construction and permit approval process delays. Unfortunately slippages remain a very unpredictable component of our business, but we note that as these installations ultimately occur they should benefit our 2007 results,” stated Messrs. Gelfond and Wechsler.
Separately, the Company provided an update regarding its exploration of strategic alternatives, including the possible sale or merger of the company. While the Company did not find a buyer willing to acquire IMAX at terms initially sought by the Board of Directors, the Special Committee of the Board has since authorized the investment banks Allen & Company and UBS to explore interest existing at a lower valuation than originally sought. As part of this ongoing process, the Company remains committed to exploring additional interest as appropriate.
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On the film side,Superman Returns:AnIMAX3D Experiencehas grossed approximately $30.8 million to date.The Ant Bully: AnIMAX3D Experience, which opened in late July, grossed $7.1 million. The Company releasedOpen Season: AnIMAX3D Experienceon September 29, which so far has grossed $7.8 million.
The remainder of IMAX’s 2006 film slate includesHappy Feet: TheIMAXExperience, a CGI animated musical-comedy to be released on November 17th, and Twentieth Century Fox’sNight at the Museum:TheIMAXExperience, an adventure comedy starring Ben Stiller and Robin Williams, which premieres December 22nd. The Company’s 2007 film slate includesSpider-Man 3: TheIMAXExperiencescheduled for release in May, andHarry Potter and the Order of the Phoenix:TheIMAXExperience,which will be released in July.
“To date, 16 Hollywood titles have been digitally re-mastered with DMR technology and released to IMAX® theatres, and we are optimistic about the strong prospects of the films scheduled for the remainder of the year as well as our 2007 film slate. In 2006 we have partnered with three major studios, and we look forward to continuing to expand our studio relationships in 2007 and beyond. IMAX’s significance to the Hollywood release platform continues to increase, and we think that our ability to deliver a unique out-of-home entertainment experience via the expanding network of IMAX theatres remains a key component of our future growth,” concluded Messrs. Gelfond and Wechsler.
The Company stated that it is still responding to informal inquiries from the U.S. Securities and Exchange Commission and the Ontario Securities Commission regarding the Company’s timing of revenue recognition, including its application of multiple element arrangement accounting in its revenue recognition for theatre systems. The Company continues to cooperate in this inquiry. The Company believes its application of this accounting policy is, and has historically been, in accordance with GAAP, and the Company’s position continues to be supported by its auditors, PricewaterhouseCoopers LLP.
The Company will host a conference call on Thursday, November 9, 2006 at 8:00 AM ET. To access the call interested parties should call (719) 457-2692 approximately 10 minutes before it begins. A recording of the call will be available by dialing (719) 457-0820. The code for both calls is 2262074. The Company will also host a webcast of the conference call with an accompanying PowerPoint presentation. These can both be accessed on www.imax.com by clicking on ‘Company Info’ and then ‘Investor Relations.’
About IMAX Corporation
Founded in 1967, IMAX Corporation is one of the world’s leading entertainment technology companies and the newest distribution window for Hollywood films. IMAX delivers the world’s best cinematic presentations using proprietary IMAX, IMAX®3D, and IMAX DMRtechnology. IMAX DMR (Digital Re-mastering) makes it possible for virtually any 35mm film to be transformed into the unparalleled image and sound quality of The IMAX Experience. The IMAX brand is recognized throughout the world for extraordinary and immersive entertainment experiences. As of September 30, 2006, there were 280 IMAX theatres operating in 40 countries.
IMAX®, IMAX® 3D, IMAX DMRÒ, IMAXÒ MPXÒ, and The IMAX Experience® are trademarks of IMAX Corporation. More information on the Company can be found at www.imax.com.
This press release contains forward looking statements that are based on 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 the timing of theatre system installations, the mix of theatre systems shipped, the timing of the recognition of revenues and expenses on film production and distribution agreements, the performance of films, the viability of new businesses and products, including the transition to digital systems, and fluctuations in foreign currency and in the large format and general commercial exhibition market. These factors and other risks and uncertainties are discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 and in the subsequent reports filed by the Company with the Securities and Exchange Commission including the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, scheduled to be filed on November 9, 2006.
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For additional information please contact:
| | | |
Media: | | Investors: |
IMAX Corporation,New York | | Integrated Corporate Relations |
| Sarah Gormley | | Amanda Mullin |
| 212-821-0155 | | 203-682-8243 |
sgormley@imax.com | | |
| | | |
Entertainment Media: | | Business Media: |
| Newman & Company, Los Angeles | | Sloane & Company, New York |
| Al Newman | | Whit Clay |
| 310-278-1560 | | 212-446-1864 |
asn@newman-co.com | | wclay@sloanepr.com |
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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 | | | Nine months ended | |
| | | September 30, | | | September 30, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Revenue | | | | | | | | | | | | | | | | |
| IMAX systems | | $ | 7,319 | | | $ | 20,236 | | | $ | 40,669 | | | $ | 62,657 | |
| Films | | | 7,671 | | | | 8,047 | | | | 26,363 | | | | 18,295 | |
| Theater operations | | | 4,726 | | | | 4,311 | | | | 12,434 | | | | 12,325 | |
| Other | | | 1,010 | | | | 780 | | | | 3,076 | | | | 2,343 | |
| | | | | | | | | | | | | |
| | | | 20,726 | | | | 33,374 | | | | 82,542 | | | | 95,620 | |
Costs of goods and services | | | 14,537 | | | | 17,600 | | | | 52,468 | | | | 47,832 | |
| | | | | | | | | | | | | |
Gross margin | | | 6,189 | | | | 15,774 | | | | 30,074 | | | | 47,788 | |
| | | | | | | | | | | | | | | | | |
| Selling, general and administrative expenses | | | 9,998 | | | | 8,966 | | | | 29,954 | | | | 29,021 | |
| Research and development | | | 878 | | | | 890 | | | | 2,457 | | | | 2,429 | |
| Amortization of intangibles | | | 132 | | | | 164 | | | | 456 | | | | 481 | |
| Receivable provisions, net of (recoveries) | | | 359 | | | | (310 | ) | | | 250 | | | | (468 | ) |
| | | | | | | | | | | | | |
Earnings (loss) from operations | | | (5,178 | ) | | | 6,064 | | | | (3,043 | ) | | | 16,325 | |
| | | | | | | | | | | | | | | | | |
| Interest income | | | 227 | | | | 243 | | | | 760 | | | | 741 | |
| Interest expense | | | (4,379 | ) | | | (4,185 | ) | | | (12,784 | ) | | | (12,584 | ) |
| | | | | | | | | | | | | |
Net earnings (loss) from continuing operations before income taxes | | | (9,330 | ) | | | 2,122 | | | | (15,067 | ) | | | 4,482 | |
| Provision for income taxes | | | (1,784 | ) | | | (202 | ) | | | (634 | ) | | | (681 | ) |
| | | | | | | | | | | | | |
Net earnings (loss) from continuing operations | | | (11,114 | ) | | | 1,920 | | | | (15,701 | ) | | | 3,801 | |
| Net earnings (loss) from discontinued operations | | | (875 | ) | | | 360 | | | | 1,425 | | | | 786 | |
| | | | | | | | | | | | | |
Net earnings (loss) | | $ | (11,989 | ) | | $ | 2,280 | | | $ | (14,276 | ) | | $ | 4,587 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Earnings (loss) per share: | | | | | | | | | | | | | | | | |
| Earnings (loss) per share — basic: | | | | | | | | | | | | | | | | |
| Net earnings (loss) from continuing operations | | $ | (0.28 | ) | | $ | 0.05 | | | $ | (0.39 | ) | | $ | 0.10 | |
| Net earnings (loss) from discontinued operations | | $ | (0.02 | ) | | $ | 0.01 | | | $ | 0.04 | | | $ | 0.02 | |
| | | | | | | | | | | | | |
| Net earnings (loss) | | $ | (0.30 | ) | | $ | 0.06 | | | $ | (0.35 | ) | | $ | 0.12 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Earnings (loss) per share — diluted: | | | | | | | | | | | | | | | | |
| Net earnings (loss) from continuing operations | | $ | (0.28 | ) | | $ | 0.04 | | | $ | (0.39 | ) | | $ | 0.09 | |
| Net earnings (loss) from discontinued operations | | $ | (0.02 | ) | | $ | 0.01 | | | $ | 0.04 | | | $ | 0.02 | |
| | | | | | | | | | | | | |
| Net earnings (loss) | | $ | (0.30 | ) | | $ | 0.05 | | | $ | (0.35 | ) | | $ | 0.11 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Weighted average number of shares outstanding (000’s): | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Basic | | | 40,286 | | | | 40,025 | | | | 40,265 | | | | 39,800 | |
| | | | | | | | | | | | | | | | | |
| Diluted | | | 40,286 | | | | 42,218 | | | | 40,265 | | | | 42,026 | |
| | | | | | | | | | | | | | | | | |
| Additional disclosure: | | | | | | | | | | | | | | | | |
Depreciation and amortization1 | | | 5,127 | | | | 4,241 | | | | 13,888 | | | | 11,490 | |
| | |
| (1) | | Includes $0.3 million and $0.9 million in amortization of deferred financing costs charged to interest expense for the three and nine months ended September 30, 2006 (2005 — $0.3 million, $0.9 million) |
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CONDENSED CONSOLIDATED BALANCE SHEETS
In accordance with United States Generally Accepted Accounting Principles
(in thousands of U.S. dollars)
| | | | | | | | | |
| | | September 30, | | | December 31, | |
| | | 2006 | | | 2005 | |
| | | (unaudited) | | | | | |
| | | | | | | | | |
Assets | | | | | | | | |
| Cash and cash equivalents | | $ | 22,001 | | | $ | 24,324 | |
| Short-term investments | | | 4,219 | | | | 8,171 | |
| Accounts receivable, net of allowance for doubtful accounts of $7,201 (2005 — $5,892) | | | 32,092 | | | | 26,165 | |
| Financing receivables | | | 62,529 | | | | 63,006 | |
| Inventories | | | 33,110 | | | | 28,294 | |
| Prepaid expenses | | | 4,389 | | | | 3,825 | |
| Film assets | | | 2,946 | | | | 3,329 | |
| Fixed assets | | | 25,619 | | | | 26,780 | |
| Other assets | | | 8,023 | | | | 11,618 | |
| Deferred income taxes | | | 6,171 | | | | 6,171 | |
| Goodwill | | | 39,027 | | | | 39,027 | |
| Other intangible assets | | | 2,619 | | | | 2,701 | |
| | | | | | | |
| Total assets | | $ | 242,745 | | | $ | 243,411 | |
| | | | | | | |
| | | | | | | | | |
Liabilities | | | | | | | | |
| Accounts payable | | $ | 9,469 | | | $ | 6,935 | |
| Accrued liabilities | | | 54,808 | | | | 55,122 | |
| Deferred revenue | | | 51,258 | | | | 44,397 | |
| Senior Notes due 2010 | | | 160,000 | | | | 160,000 | |
| | | | | | | |
| Total liabilities | | | 275,535 | | | | 266,454 | |
| | | | | | | |
| | | | | | | | | |
Shareholders’ equity (deficit) | | | | | | | | |
| Capital stock Common shares — no par value. Authorized — unlimited number. Issued and outstanding — 40,285,574 (2005 — 40,213,542) | | | 121,960 | | | | 121,674 | |
| Other equity | | | 3,249 | | | | 1,758 | |
| Deficit | | | (158,623 | ) | | | (144,347 | ) |
| Accumulated other comprehensive income (loss) | | | 624 | | | | (2,128 | ) |
| | | | | | | |
| Total shareholders’ deficit | | | (32,790 | ) | | | (23,043 | ) |
| | | | | | | |
| Total liabilities and shareholders’ equity (deficit) | | $ | 242,745 | | | $ | 243,411 | |
| | | | | | | |
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