FOR IMMEDIATE RELEASE
- ---------------------
For Iwerks Entertainment, Inc.
Contacts: William Battison Joseph Kessler
Executive Vice President Bozell Sawyer Jiller Group
Iwerks Entertainment (310) 442-2532
(818) 840-6111
IWERKS ENTERTAINMENT ANNOUNCES
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FOURTH QUARTER AND FISCAL 1997 RESULTS
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Burbank, CA, August 5, 1997 - Iwerks Entertainment, Inc. [NASDAQ NM:IWRK]
reported financial results for its fourth quarter and fiscal year ended
June 30, 1997.
The Company reported a net loss of $(10.3) million, or $(0.85) per share,
for the quarter and a net loss of $(10.0) million, or $(0.84) per share,
for the year. These results compare with 1996 fourth quarter net income of
$976,000, or $0.08 per share, and fiscal year 1996 net income of $3.1
million, or $0.26 per share.
Approximately $5.6 million of the net loss in the 1997 fiscal year was the
result of a write-down of the Reactor(TM) Portable Simulation Theaters
under SFAS 121, Accounting for the Impairment of Long Lived Assets and for
Long Lived Assets to be Disposed of." As previously disclosed, the Company
lost AT&T as a major sponsor of the Reactor(TM) fleet in the first quarter
of fiscal 1997. Since that time, and through the fourth quarter, the
Company has aggressively pursued new sponsorship opportunities and other
options to replace these revenues. The failure to consummate these
alternatives prior to the end of the year prompted the Company to take the
charge under SFAS 121.
Additional fourth quarter charges were taken for: allowances for doubtful
accounts, establishment of an inventory reserve, certain film costs,
additional reserves for legal affairs, and professional fees associated
with a merger agreement with Showscan Entertainment announced earlier
today.
Iwerks' merger agreement with Showscan Entertainment will create the
world's largest player in ride simulation attractions, Iwerks' most
profitable business segment. The combined companies will have an installed
base of more than 160 ride simulation theaters worldwide and a combined
film library of more than 60 simulation films.
The merger agreement is subject to approval by shareholders of both
companies, as well as other closing conditions. The transaction is
expected to be consummated in the fourth quarter of calendar 1997.
"We are obviously disappointed with these results, but we believe that we
are now positioned to move forward as a major player in out-of-home
entertainment with a greater market presence and a strong balance sheet,"
said Roy A. Wright, Chairman and Chief Executive Officer of Iwerks.
Mr. Wright continued: "Although we expect to report a loss in our first
and second quarters of fiscal 1998 due to acquisition costs and seasonal
factors, we expect to begin to realize the benefits of the merger in the
last half of the fiscal year."
Iwerks also reported a decline in revenues, from $11.4 million in fourth
quarter 1996 to $8.9 million in fourth quarter 1997, and from $48.5 million
in fiscal 1996 to $39.6 million in fiscal 1997. The decline in annual
revenues was due primarily to significantly lower Reactor(TM) revenues due to
the lost sponsorship, lower hardware sales, lower film production, and a
one-time cancellation settlement in fiscal 1996 with the Tokyo Expo.
Iwerks Entertainment is one of the world's leading producers of high-tech,
multi-sensory experiences such as ride simulation and giant-screen
theaters. Serving prestigious entertainment, information and marketing
providers, Iwerks attractions can be found worldwide at location-based
entertainment centers, amusement parks, family entertainment centers,
shopping centers, casinos, resorts, nightclubs, restaurants, museums,
fairs, festivals and more.
FORWARD-LOOKING STATEMENTS DISCLOSURE
-------------------------------------
With the exception of the historical information, the matters discussed
above include forward-looking statements that involve risks and
uncertainties. Certain important factors could cause actual results to
differ materially from those indicated in the forward-looking statements
including, in connection with the merger, the ability of the combined
company to achieve cost savings and revenue growth will depend on its
ability to quickly and effectively merge the operations and the product
lines and manage the resulting larger operations. Other factors impacting
future results include the level of revenue, costs of sales and the ability
of the Company to maintain pricing at a level necessary to maintain gross
profit margins, the level of selling, general and administrative costs, the
performance by the Company under its existing purchase contracts and the
ability to obtain new contracts, the success of the Company's owned and
operating strategy, the ability of the Company to find additional sponsors
for its Reactors(TM) or alternative sources of revenue, the ability of the
Company to identify and successfully negotiate arrangements with joint
venture and other strategic partners, the success of the Company's film
software, the effects of technological developments, competition, general
economic conditions and acts of God and other events outside the control of
the company.
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FINANCIAL HIGHLIGHTS FISCAL 1997
(IN 000S, EXCEPT PER SHARE DATA)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED FISCAL
YEARS ENDED
JUNE 30 JUNE
30
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- ----------------------
1997 1996 1997
1996
------- ------- -------
- --------
Revenue $8,924 $11,388 $39,584
$48,510
------- ------- -------
- --------
Costs and expenses:
Cost of Sales 8,421 7,074 28,948
28,675
Selling, General & Administrative 5,027 3,277 14,897
17,019
Research & Development 311 89 726
358
Loss on Impairment of Assets 5,586 -- 5,586
--
------- ------- ------
- -------
Total costs 19,345 10,440 50,157
46,052
Operating income (loss) (10,421) 948 (10,573)
2,464
Interest income, net 195 177 734
784
------- ------- ------
- ------
Net income (loss) before taxes (10,226) 1,125 (9,839)
3,248
Provision for income taxes (117) (149) (117)
(149)
------ ------- ------
- ------
Net income (loss) $ (10,343) $ 976 $ (9,956)
$ 3,099
====== ====== ======
======
Net income (loss) per common share (0.85) 0.08 (0.84)
0.26
====== ====== ======
======
Weighted average shares outstanding 12,153 12,659 11,855
12,144
====== ====== ======
======
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
JUNE 30, 1997 JUNE 30, 1996
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ASSETS
Cash and marketable securities $ 19,067 $ 19,456
Other current assets 16,188 13,621
Investment in debt securities -- 5,826
Properties, net 10,377 15,975
Goodwill 15,367 17,360
Other assets 3,530 688
----- -----
Total Assets $ 64,529 $ 72,926
====== =======
LIABILITIES & STOCKHOLDERS EQUITY
Current liabilities $14, 316 $13,529
Long-term liabilities 1,827 2,732
Stockholders' equity 48,386 56,665
------ ------
Total liabilities & stockholders' equity $ 64,529 $ 72,926
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