--- title: Imax Corporation Reports Fourth Quarter And Year-End Results publisher: "IMAX" description: "HIGHLIGHTS Fourth quarter and fiscal 1998 operating earnings exceed analyst expectations prior to non-cash and other one-time charges. Agreement signed with The Walt Disney Company for exclusive four-month giant-screen release of Fantasia 2000 to IMAX® theatres around the world beginning on January" canonical: "https://www.imax.com/pr/imax-corporation-reports-fourth-quarter-and-year-end-results" date: 1999-02-10 last_updated: 2000-02-01 --- Imax Corporation Reports Fourth Quarter And Year-End Results ============================================================ Wed, Feb 10, 1999 **HIGHLIGHTS** * Fourth quarter and fiscal 1998 operating earnings exceed analyst expectations prior to non-cash and other one-time charges. * Agreement signed with The Walt Disney Company for exclusive four-month giant-screen release of _Fantasia 2000_ to IMAX® theatres around the world beginning on January 1, 2000. * Schedule of theatre system deliveries and increased investment in SG&A in preparation for Hollywood-produced film releases expected to result in approximately flat operating earnings in 1999. * Internal expectations of operating earnings in 2000 remain unchanged due to strong backlog and anticipated signings activity. Toronto, Canada — February 10, 1999 -- Imax Corporation (NASDAQ:IMAXF; TSE:IMX) today reported earnings for the fourth quarter and year ended December 31, 1998. For the fourth quarter, the Company took certain primarily non-cash charges with respect to a reduction in its motion simulation activities and with respect to the valuation of certain films in its library. Prior to the charges and the impact of its recent debt refinancing, the Company earned $0.34 per share for the fourth quarter and $0.93 per share for the fiscal year, exceeding analyst expectations. After the impact of the charges and the debt refinancing which total $0.90 per share, the Company reported a loss of $0.56 per share for the fourth quarter and a profit of $0.03 per share for the fiscal year. These results compare to earnings of $0.24 per share for the fourth quarter of 1997 and $0.68 per share for fiscal 1997. Late yesterday, the Company announced an agreement with Buena Vista Pictures Distribution, a unit of The Walt Disney Company, for an exclusive four-month release to IMAX® theatres of Disney's newest animated classic _Fantasia 2000_ beginning on January 1, 2000. The IMAX theatrical release will be one of the focal points of Disney's new millenium celebration and will be the first full-length feature film to be repurposed into Imax's 15/70 film format and released to IMAX theatres. _Fantasia 2000_ is also the first animated film to be released to IMAX theatres and is a further confirmation of the Company's strategy to leverage the unique IMAX theatre experience into a more mainstream role in the entertainment industry. "The exclusive IMAX theatre release of _Fantasia 2000_ represents a giant leap forward in Imax's growth as a mainstream commercial entertainment provider," said Imax co-Chief Executive Officers Brad Wechsler and Rich Gelfond. "In the coming months, Imax Corporation and IMAX theatres will be more broadly promoted and publicized than ever before. This dramatic increase in our awareness and theatre attendance will create many new opportunities for the Company around the world and will help set the stage for the next phase of the Company's growth. We have never been more excited about Imax's long-term future than we are today." The Company also announced today that because of a reduction in theatre system deliveries in 1999, primarily due to construction delays of its clients, and a strategy to invest in its business in anticipation of its future growth, its earnings in 1999 would be approximately equal to its earnings in 1998 before the impact of the charges. The Company further added that it has not materially changed its earnings outlook for the year 2000. "Yesterday's announcement with The Walt Disney Company is a milestone in the history of Imax Corporation and reaffirms our belief that Imax is still in its infancy," said Messrs. Wechsler and Gelfond. "While we are obviously disappointed at the anticipated delays in theatre system deliveries in 1999, we feel we must continue to invest in the Company this year to realize the long-term growth opportunities that will come from the exclusive release of _Fantasia 2000_ and our ongoing discussions with other motion picture studios." Messrs. Wechsler and Gelfond continued "Our continued investments in 1999 in our affiliate relations programs, brand marketing and research and development will help the Company capitalize upon the increased profile and theatre attendance that will come from the IMAX theatre release of Hollywood-produced films. With a strong backlog of deliveries for 2000 at this preliminary stage, we have not materially changed our internal expectations of our earnings in 2000." For the year ended December 31, 1998, the Company established a new record for the value of theatre system signings with contracts for 44 third-party theatre locations valued at a record $129.2 million as compared to the $128.3 million value of the 48 third-party contracts signed in the prior-year. During the fourth quarter, the Company signed contracts for nine third-party IMAX theatre systems valued at $26.0 million as compared to signing contracts for 15 third-party IMAX theatre systems valued at $39.3 million in the fourth quarter of 1997. The Company's sales backlog was $175.8 million at December 31, 1998 slightly exceeding the $175.4 million value at December 31, 1997. In the fourth quarter, the Company's revenues increased 22% to $66.6 million from $54.6 million in the prior year as strong growth in systems and film revenue offset a decline in other revenue. Systems revenue increased 29% to $47.8 million from $37.1 million in the prior year as the Company recognized revenues on a record 16 theatre system deliveries in the fourth quarter of 1998 versus 10 theatre systems in the fourth quarter of 1997. Film revenue increased 91% in the quarter to $11.8 million from $6.2 million in the prior year due to increases in post-production and distribution revenues primarily as a result of the release of _T-REX: Back to the Cretaceous_. Other revenue declined 39% to $6.9 million from $11.3 million as a result of a decrease in deliveries of IMAX _Ridefilm_ systems. The Company recognized a charge in 1998 of $0.46 per share to write-down the value of its motion simulation assets including those of Ridefilm Corporation and $0.35 per share to provide for unrecoverable costs on certain films in its library which have either underperformed to date or which the Company believes will have less value in light of the impending release of Hollywood-produced films. In addition, as a result of the Company's recent debt refinancing, the Company incurred an extraordinary charge of $0.07 per share for the redemption premium on its Senior Notes due 2001 and a charge of $0.02 for the redemption of its Preferred Class C Shares at prices that exceeded their book value. For the fiscal year ended December 31, 1998, the Company's revenues increased 20% to $190.4 million from $158.5 million as a result of higher systems revenue. Systems revenue increased 45% to $140.9 million from $97.5 million in the prior-year period as the Company recognized revenues on a record 41 theatre systems as compared to 24 theatre systems in the prior-year period. Film revenue decreased 22% to $30.8 million from $39.7 million in the prior-year period due to decreases in film production and film distribution revenues. Other revenue declined 12% to $18.7 million from $21.3 million as a result of a decrease in IMAX _Ridefilm_ deliveries. The Company's sales backlog at December 31, 1998 represented contracts for 76 theatre systems. Most of the 42 IMAX 3D SR theatre systems in backlog represent theatre systems contracted for under multi-theatre exhibitor agreements and may be replaced in backlog by larger IMAX 3D theatre systems when specific theatre locations are determined in the future. There are 13 theatre systems in backlog which will be located at theatres in which the Company has an equity interest and therefore have no dollar value ascribed to them in the Company's sales backlog. Founded in 1967, Imax Corporation has consistently delivered the world's premiere cinematic experiences. As of December 31, 1998, there were more than 180 permanent IMAX theatres in 25 countries, with a backlog of more than 75 theatre systems scheduled to open in 15 new countries during the next few years. Over 500 million people have seen an IMAX presentation since the medium premiered in 1970. In 1999, more than 70 million people worldwide are expected to attend an IMAX theatre. Imax has forged strategic alliances and relationships with some of the most prominent corporations in the world including The Walt Disney Company, Famous Players Inc. (a subsidiary of Viacom Inc.) and Loews Cineplex Corp. In 1997, Imax was awarded an Oscar® for Scientific and Technical Achievement by the Academy of Motion Picture Arts and Sciences. This press release contains forward looking statements that are based on management 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 effect these statements include the timing of theatre system deliveries, the mix of theatre systems shipped, the timing of the recognition of revenues and expenses on film production and distribution agreements, and foreign currency fluctuations. 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, 1997 and in the subsequent reports filed by the Company with the Securities and Exchange Commission. **IMAX CORPORATION** CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Amounts in Accordance with U.S. Generally Accepted Accounting Principles _(in thousands of U.S. dollars, except per share data)_ **_(unaudited)_**   Three months ended December 31, Years ended December 31,   1998 1997 1998 1997 **Revenue**         Systems $ 47,827 $ 37,083 $ 140,874 $ 97,539 Films 11,838 6,215 30,824 39,683 Other 6,925 11,310 18,657 21,259   66,590 54,608 190,355 158,481           Costs and expenses (1) 60,221 25,857 111,784 73,806           **Gross margin** 6,369 28,751 78,571 84,675           Loss from equity accounted investees (2) (5,614) (22) (6,763) (22)           Selling, general and administrative expenses (3) 13,091 10,546 38,777 32,115 Research and development 521 700 2,745 2,129 Amortization of intangibles (4) 4,058 794 5,948 2,701           **Earnings (loss) from operations** (16,915) 16,689 24,338 47,708           Interest income 1,872 1,119 5,320 5,604 Interest expense (4,719) (3,430) (14,646) (13,402) Foreign exchange gain (loss) 937 (547) 588 (623)           **Earnings (loss) before income taxes and minority interest** (18,825) 13,831 15,600 39,287           (Provision for) recovery of income taxes 5,659 (5,984) (9,810) (17,265)           **Earnings (loss) before minority interest** (13,166) 7,847 5,790 22,022           Minority interest (419) (513) (1,895) (1,357)           **Earnings (loss) before extraordinary item** (13,585) 7,334 3,895 $ 20,665 Extraordinary loss on early extinguishment of debt, net of income tax benefit of $1,588 (2,095) \- (2,095) \-           Net earnings (loss) $ (15,680) $ 7,334 $ 1,800 $ 20,665           Net earnings (loss) available to common shareholders (5) $ (16,423) $ 7,251 $ 794 $ 20,335           **Per share data**         Earnings (loss) before extraordinary item         Basic $ (0.49) $ 0.25 $ 0.10 $ 0.71 Diluted $ (0.49) $ 0.24 $ 0.09 $ 0.68           Net earnings (loss) after extraordinary item         Basic $ (0.56)   $ 0.03   Diluted $ (0.56)   $ 0.03             Weighted average number of shares outstanding (000's)         Basic 29,383 29,075 29,281 28,544 Diluted 29,383 30,287 30,474 30,120 **Notes to the Condensed Consolidated Statements of Operations:** 1. Costs and expenses for the three months and year ended December 31, 1998 include charges of $7.9 million related to the Company's motion simulation operations and a $19.1 million provision for unrecoverable film costs related to certain films in the Company's film library. 2. Loss from equity accounted investees for the three months and year ended December 31, 1998 include charges related to the Company's investment in motion simulation joint ventures. 3. Selling, general and administrative expenses for the three months and year ended December 31, 1998 include $1.9 million of charges related to the Company's motion simulation operations. 4. Amortization of intangibles for the three months and year ended December 31, 1998 includes a $3.3 million write-off of goodwill related to the Company's motion simulation operations. 5. Net earnings (loss) available to common shareholders for the three months and year ended December 31, 1998 includes a provision of $0.7 million with respect to the early redemption of the Company's Class "C" preferred shares. For additional information, please contact: Imax Corporation, Toronto Victoria Dinnick 905-403-6366 Imax Corporation, New York Brian Weisfeld (Analysts) 212-821-0121 Newman & Company, Los Angeles Al Newman (Entertainment Media) 310-777-5252 Edelman Financial, New York Silvia Rosselli (Media) 212-704-8217