Watchmen, Transformers 2 & More Locked In For The IMAX Experience in 09
Reported by Jay Cochran - 2008.08.11
IMAX Corporation reported that it recorded a net loss per diluted share of $0.29 for the second quarter of fiscal 2008, compared to a net loss of $0.11 per diluted share for the second quarter of fiscal 2007. At the same time, the Company announced that the roll out of its IMAX(R) Digital system technology launched as scheduled, with the successful delivery and installation of its first three digital projection systems at three AMC Entertainment, Inc. ("AMC") theatres located in the Baltimore/Washington D.C. area, during the second quarter.
IMAX Co-Chairmen and Co-CEOs Richard L. Gelfond and Bradley J. Wechsler commented, "We are very pleased with the significant strategic progress made thus far in 2008, despite the fact that, as we have previously discussed, our financial results do not yet reflect the pieces being put in place that should return IMAX to profitability. Importantly, the execution of our digital roll out launched on time, our future film slate is strong and growing, our pipeline of new business remains robust, we have the largest systems backlog in our history reflecting our joint revenue sharing strategy, and we believe we have the necessary financing in place to fund our joint venture initiative. Looking ahead, we believe the combination of having approximately 50 digital systems in operation by year-end and the strength of our second half film slate, led by The Dark Knight: The IMAX Experience, should drive improved second half financial performance. We continue to expect profitability in 2009."
The Company signed agreements for six IMAX theatre systems in the second quarter of fiscal 2008 compared to agreements for six IMAX theatre systems in the second quarter of 2007. At the end of the second quarter, the Company's backlog consisted of a record 246 theatre systems compared to 79 theatre systems in backlog at the end of last year's second quarter. Included in the 2008 and 2007 system backlog totals were 139 and three joint revenue sharing arrangements, respectively, for which there is no assigned backlog value. To date, the Company has signed contracts for 189 IMAX Digital theatre systems. In late July, the Company delivered its second set of digital systems to three AMC theatres in the Philadelphia market and expects the systems to be operational by next weekend, as planned.
Messrs. Gelfond and Wechsler continued, "The launch of our digital technology and 100-theatre joint revenue sharing arrangement with AMC are important strategic milestones for IMAX and represent the first steps toward what we expect to be a period of significant future growth for our organization. The advent of IMAX Digital virtually eliminates high film print costs incurred by the studios and lowers installation costs for exhibitors, allowing for greater programming flexibility. In addition, with digital we will have the ability to show 10 to 12 major studio releases per year, as opposed to six to eight historically, which should translate into higher revenue and greater per-theatre profitability."
In addition to the Company's joint revenue sharing arrangement with AMC announced in the fourth quarter of 2007 as well as its 31 digital theatre joint revenue sharing arrangement with Regal Cinemas, Inc. announced in the first quarter of 2008, exhibitor interest in IMAX Digital and the Company's joint revenue sharing model continues, evidenced by recently announced theatre deals with leading international exhibitors Hoyts Cinemas Ltd. in Australia and Tokyu Recreation in Japan.
"Our joint revenue sharing business model makes it more affordable for exhibitors to be in the IMAX business while driving greater recurring revenue into our business. This model, coupled with our digital platform, should enable us to rapidly increase the size of our worldwide network. The installation of our commercial system backlog will roughly triple the number of IMAX theatres in domestic multiplexes and more than double the size of our commercial international network by 2010," said Messrs. Gelfond and Wechsler.
Turning to second quarter financial results, for the three months ended June 30, 2008, total revenues were $21.2 million, as compared to $27.1 million reported for the prior year period.
- Systems revenue was $10.6 million versus $14.0 million in the prior
year period. The Company installed four theatre systems in the second
quarter, same as last year, however revenue recognition was deferred
on two of those systems due to contractual rights for digital
- Film revenue was $6.6 million during the second quarter of 2008
versus $8.0 million in the second quarter of 2007. This included
IMAX DMR(R) revenues of $2.5 million compared to $3.8 million in
- Theatre operations and other revenue of $4.0 million in the second
quarter of 2008 compared to $5.1 million in the second quarter of
Regarding second quarter film performance, in April the Company released Paramount Pictures' Shine A Light: The IMAX Experience which grossed $4.6 million worldwide as of quarter end, and was followed on May 9 by Warner Bros. Pictures' Speed Racer: The IMAX Experience, which grossed $5.3 million worldwide as of quarter end. On June 6, the Company released DreamWorks Animation's Kung Fu Panda: The IMAX Experience, which grossed $8.1 million worldwide for the quarter and has grossed $11.7 million to date.
Selling, general and administrative expenses were $11.2 million in the second quarter compared to $11.1 million in the same period a year ago. Research and development costs increased to $2.0 million in the second quarter of 2008 as compared to $1.1 million in the second quarter of 2007, reflecting the Company's investment in digital technology.
Messrs. Gelfond and Wechsler commented, "The Company's second quarter results reflect investments made to transition the Company to a digital platform, two fewer system installations for which we could recognize revenue as well as difficult year-over-year comparisons to last year's highly successful Spider-Man 3: The IMAX Experience. We believe The Dark Knight: The IMAX Experience, combined with strength of our second half film slate, should offset much of the softness of our year-to-date IMAX DMR film performance."
The Company's cash position was $24.6 million as of June 30, 2008, compared to cash and short term investments of $16.9 million as of December¬ 31, 2007 and $18.5 million as of June 30, 2007. The Company's increased cash position includes the private placement sale of approximately 2.73¬ million common shares in May of this year at market prices, and resulting proceeds of approximately $18 million. The Company made its bi-annual interest payment on its senior notes of $7.7 million in June.
With respect to the third quarter, on July 18th, IMAX released Warner¬ Bros. Pictures' blockbuster hit The Dark Knight: The IMAX Experience which is currently showing on 94 domestic and 29 international screens. Director Christopher Nolan shot six sequences of the film with IMAX cameras, marking the first time ever that a major Hollywood film has been even partially shot using IMAX cameras. In its first 19 days of release the film has grossed approximately $32.0 million worldwide, or $257,000 per screen, making it the highest grossing 2D Hollywood feature film in IMAX history and it continues to perform extremely well both domestically and internationally with several international markets still to open.
"The Dark Knight appears to be nothing short of a cultural phenomenon and we are delighted to be a part of it," said Messrs. Gelfond and Wechsler. "In addition to a record opening weekend and continued sell outs, the film is demonstrating extraordinary legs and very modest week-to-week drops in box office results. The popularity of the film, particularly in the IMAX format, has tested our capacity constraints and we believe is heightening consumer interest in The IMAX Experience."
Regarding its remaining 2008 film slate, the Company is pleased to announce it has agreed on material terms with DreamWorks Pictures/Paramount to release Eagle Eye: The IMAX Experience, the Company's 30th DMR film, on September 26th. Following this action thriller, as previously announced, IMAX will partner with DreamWorks Animation to release Madagascar 2: The IMAX Experience on November 7, for a two week run followed by Warner Bros. Pictures' Harry Potter and the Half Blood Prince: An IMAX 3D Experience on November 21. With the addition of Eagle Eye, the Company expects to have eight first run DMR films in 2008 compared to five in 2007.
Looking to 2009, the Company is pleased to announce that the film adaptation of graphic novel Watchmen, (Warner Bros. Pictures/Paramount) directed by Zack Snyder, will be released to IMAX theatres on March 6th. Watchmen is Snyder's second film to be released in IMAX, the first being the highly successful 300. In addition, the Company has reached agreement on material terms to release IMAX versions of the following 2009 Hollywood films: Night at the Museum 2: Escape from the Smithsonian (20th Century Fox, May 22, 2009) and Transformers: Revenge of the Fallen (DreamWorks Pictures/Paramount, June 26, 2009). Both films follow the collaborations between IMAX and the respective studios on the first Night at the Museum in December of 2006 and Transformers in September of 2007. Watchmen, Night at the Museum 2 and Transformers: Revenge of the Fallen are in addition to the Company's previously announced 2009 films, Under the Sea 3D, an original IMAX film being released in partnership with Warner Bros. Pictures, and DreamWorks Animation's Monsters vs. Aliens 3D.
Messrs. Gelfond and Wechsler commented, "As we significantly increase the number of joint revenue sharing deals we sign, the film choices we make will have a greater impact on our future financial performance as we will receive a greater percentage of the box office. We believe the prospective films for 2009 are the type of blockbuster content that plays well to The IMAX Experience and should make for an exciting film slate. We are experiencing unprecedented interest from studios and filmmakers in featuring major Hollywood releases in IMAX and we are pleased to be expanding our studio relationships. We believe the IMAX brand is becoming synonymous with 'event-type' movie going that is compelling to movie-goers, theatre exhibitors and the studios and we look forward to announcing additional films in the coming weeks and months."
The Company's announced 2010 film slate includes: Hubble 3D (working title) - Warner Bros. Pictures - February 2010; How to Train Your Dragon 3D - DreamWorks Animation - March 2010; and Shrek Goes Fourth 3D - DreamWorks Animation - May 2010.
Source: IMAX Corporation