SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. _____)
Filed by the registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of
[ ] Definitive Proxy Statement the Commission Only
(as permitted by
[X] Definitive Additional Materials Rule 14a-6(e)(2)
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
IWERKS ENTERTAINMENT, INC.
- ---------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- ---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
- ---------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
Not Applicable
- ---------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11.
Not Applicable
- ---------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
Not Applicable
- ---------------------------------------------------------------------------
(5) Total fee paid:
Not Applicable
- ---------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials:
- ---------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- ---------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- ---------------------------------------------------------------------------
(3) Filing party:
- ---------------------------------------------------------------------------
(4) Date filed:
- ---------------------------------------------------------------------------
The following press release was distributed to news wire services and
the public.
BURBANK, Calif.--(ENTERTAINMENT WIRE)--March 25, 1998-- Iwerks
Entertainment Inc. (NASDAQ NM:IWRK) announced that Institutional
Shareholder Services (ISS), a leading provider of proxy voting and
corporate governance services, issued a Proxy Analysis on March 24,
1998, that concludes that Iwerks' proposed merger with Showscan
Entertainment Inc. (NASDAQ NM:SHOW) is "beneficial to both Iwerks
and its shareholders" and that the merger "warrants shareholder
support."
ISS prepared the report after meeting with Iwerks management and
financial advisers on March 23, 1998, and after speaking with
representatives of Providence Capital regarding their concerns. In its
report, ISS states that it does not agree with Providence's argument
that Iwerks has not provided sufficient information regarding the
merger.
ISS said: "In our opinion, the information contained in the proxy
statement and the recent press releases is adequate."
ISS states that it agrees with Iwerks' basic contentions regarding the
benefits of the merger, including that "the merger will generate
positive cash flows and be accretive to earnings per share in fiscal
year 1999 and fiscal year 2000"; that "the steady flow of cash resulting
from the merger will be used...to accelerate the growth of [Iwerks']
sales in the giant screen theater industry"; and that "there is a
well-defined integration plan in place."
Charles Goldwater, Iwerks' president and chief executive officer, said: "ISS
was very thorough in their analysis of our proposal. Their agreement with
our assertions supports our confidence that this merger is beneficial to
Iwerks and its shareholders, and will position the company to
significantly and immediately begin to advance our strategic growth
initiatives."
In an effort to continue its dialogue with and be responsive to
shareholders regarding the proposed merger, Iwerks Thursday also
provided supplemental information that serves to clarify certain of the
financial benefits of the proposed merger.
Iwerks had previously stated that the cash position of the combined
company for the fiscal year ended June 30, 1999, is estimated to be $8.0
million, as compared with $5.5 million estimated for Iwerks alone. In
September 1999, $5.69 million of debt assumed from Showscan will mature.
Bruce Hinckley, executive vice president and chief financial officer of
Iwerks,
said: "Based on current conditions in the financial markets, and the
current and financial condition of the company, we believe that this
debt can be refinanced when it matures in 1999.
"The company, on Dec. 31, 1997, had long-term debt consisting of lease
obligations of $1,511,000 and no other long-term liabilities. The
combined companies will have sufficient assets to secure a loan of this
size."
Iwerks also expanded upon its assertion that its recurring revenues
would increase significantly as a result of a merger with Showscan.
Iwerks said that a principal reason for consummating the merger is to
increase recurring revenues, primarily from increased film license
revenues expected to be realized from a larger installed base of
theaters and a larger film library.
Film license and other recurring revenues have historically been a more
stable source of revenues for Iwerks with less volatility from period to
period compared with Iwerks' other revenue sources.
As discussed in the company's proxy statement, revenues from hardware
sales can fluctuate substantially from quarter to quarter as a result of
the timing of theater system deliveries, contract signings, the rate of
completion of contracts and other factors.
Further, Iwerks' hardware sales in recent periods have been
significantly impacted by the recession in its important Asia-Pacific
market, which is expected to have a continuing negative impact in the
immediate future.
As previously disclosed, as a result of these factors and merger-related
and other non-recurring costs, Iwerks expects to report a loss in the
third quarter. Film license and other recurring revenues can serve to
counteract the cyclical nature of hardware sales by providing a base of
more stable revenue streams.
The company's estimate of 1999 EBITDA necessarily reflects an assumed
level of non-recurring revenues, which are inherently more difficult to
predict and could be adversely impacted by continuing economic
difficulties in the countries where Iwerks and Showscan do business.
However, Iwerks said that it has a strong contract backlog, much of
which will be recognized in fiscal 1999.
Iwerks said it is committed to achieving the estimated EBITDA figure of
$7.6 million for the combined company (versus $1.7 million estimated for
Iwerks alone) by aggressively cutting expenses if revenue targets are
PAGE 2
not being met.
Iwerks further elaborated on its point that the merger with Showscan is
expected to result in a significant reduction of overhead costs,
resulting in incremental overhead costs of approximately $1 million
while increasing revenue by more than $6 million, by saying that its
costs projections include Iwerks' intention to continue to substantially
reduce its own overhead as well as that of Showscan's upon completion of
the merger.
Both Iwerks' and Showscan's board of directors have unanimously approved
the merger and recommend that shareholders vote in favor of it. Iwerks'
shareholder meeting to vote on the proposed merger and other matters
will be held at 10 a.m. local time on March 31, 1998, at Iwerks'
offices, 4540 West Valerio St., Burbank, Calif.
Iwerks Entertainment is one of the world's leading providers and
distributors of immersive entertainment attractions such as 2-D and 3-D
ride simulation, 2-D and 3-D giant screen theaters, 360-degree video
dance clubs and other attractions.
Serving prestigious entertainment, information and marketing providers,
more than 250 Iwerks attractions can be found worldwide at location
based entertainment centers, casinos, resorts, nightclubs, restaurants,
museums, fairs, festivals and more. Visit Iwerks Entertainment on the
Internet at WWW.IWERKS.COM.
FORWARD-LOOKING STATEMENT DISCLOSURE
With the exception of the historical information, certain matters
discussed herein (including, but not limited to, the anticipated effect
of the Showscan acquisition, the Company's strategic and operating
plans, projected operating results and projected cash position) are
forward-looking statements within the meaning of Section 27A of the
Securities Act. Such forward-looking statements are subject to various
risks and uncertainties. Actual results could differ materially from
those currently anticipated due to a number of factors, including the
following: (i) the Company's ability to effectively integrate the
combined Companies' operations, achieve anticipated cost savings,
maintain and grow recurring revenues and manage the resulting larger
operations; (ii) the Company's performance under its existing contracts
and its ability to achieve future contracts; (iii) the Company's ability
to generate future revenues, control the level of costs of sales, the
ability of the Company to maintain sales prices at levels that maintain
gross margins, and the level of selling, general and administrative
expenses; (iv) the Company's ability to refinance the Showscan debt,
PAGE 3
which could be adversely affected by a change in conditions in the
financial markets or a deterioration in the Company's business or
financial condition; (v) the success of the Company's film licensing,
distribution and owned and operated strategies; (vi) the Company's
ability to secure additional sponsors for its Reactors or alternative
sources of revenues; (vii) the success of the Company's film software;
(viii) general economic conditions in the United States and the
Company's international markets, and (ix) the other factors discussed
under the caption, "Risk Factors," in the Company's Proxy Statement
filed with the Securities and Exchange Commission in connection with the
Showscan merger. The Company does not ordinarily make projections of
future operating performance and undertakes no obligation to publicly
release the result of any revisions to the projections or any other
forward-looking information included herein that may be made to reflect
any future events or circumstances. All stockholders are urged to read
the proxy statement in full, particularly the discussion under the
caption, "Risk Factors."
- ------------------------------------------------------------------------
Contact:
BSMG Worldwide
Joseph Kessler, 310/442-2532
PAGE 4