IMAX Corporation reports third quarter 2005 financial results

IMAX Corporation reports third quarter 2005 financial results

HIGHLIGHTS ----------

- Company reports earnings from operations of $6.1 million, up 8% from the third quarter of 2004, and net earnings of $0.05 per diluted share, in line with guidance.

- Company reaches agreement for 12 new IMAX(R) theatre systems in the third quarter, the fifth consecutive quarter of double-digit signings, bringing the nine-month total to 37, more than the number of signings for all of 2004.

- Summer box office bucks the industry trend, as IMAX digitally re-mastered versions of Batman Begins and Charlie and the Chocolate Factory together gross nearly $30 million, leading into the Company's two highly anticipated Holiday releases.

- Next year's film slate is now nearly complete, with five releases including three IMAX(R) 3D films and digitally re-mastered versions of Superman Returns and Poseidon, announced this morning.

TORONTO, Nov. 3 /PRNewswire-FirstCall/ -- IMAX Corporation (NASDAQ: IMAX; TSX: IMX) today reported net earnings of $0.05 per diluted share for the quarter ended September 30, 2005. This is in line with the Company's guided range of between $0.04 and $0.07 per diluted share, and compares to net earnings of $0.05 per diluted share reported for the three months ended September 30, 2004. Earnings from operations increased 8% to $6.1 million for the third quarter of 2005.

The Company signed agreements for twelve IMAX(R) theatre systems during the three months ended September 30, 2005, the fifth consecutive quarter of double-digit signings. For the nine months ended September 30, IMAX has already signed deals for 37 theatre systems, eclipsing the total number of signings for all of 2004, 2003 or any other full year since 1999. Six of the third quarter's signings were for IMAX MPX theatre systems, as commercial exhibitors world-wide continue to embrace the Company's multiplex-designed product. This brings the total number of MPX deals through September 30, 2005 to 57, more than double the number through September 30, 2004.

"With the foundation for our commercial strategy firmly in place, our business momentum continues to accelerate, as evidenced by our fifth straight quarter of double-digit signings and record-breaking summer film performances," said IMAX Co-Chief Executive Officers Richard L. Gelfond and Bradley J. Wechsler. "We believe we are well positioned to ultimately bring The IMAX Experience(R) to hundreds of multiplexes around the world, and we have only just begun to tap into this enormous growth opportunity."

The September quarter's signings include: a three-theatre agreement with a commercial operator in Israel; two theatres in Mexico, which represent IMAX's 19th and 20th signings in that country; agreements for IMAX theatres to be installed in commercial complexes in Salt Lake City, Utah and outside of Dallas, Texas; deals to bring the first IMAX theatre to Brazil and to Argentina; and an agreement with the largest commercial exhibitor in Ufa, Russia, one of four Russian cities where IMAX theatres are set to debut next year.

Audiences flocked to theatres for The IMAX Experience this summer, as the Company's two IMAX DMR(R) film releases grossed nearly $30 million in three months. During the quarter, Warner Bros. Pictures' Batman Begins: The IMAX Experience set a new box office record for a 2D DMR release, and has grossed close to $16 million to date. On its heels, Warner Bros. Pictures' Charlie and the Chocolate Factory: The IMAX Experience set a three-day opening record, grossing over $2 million from July 15th through July 17th, and has now grossed nearly $14 million. In September, together with Tom Hanks' Playtone Productions, IMAX released the next in its series of celebrated space films, Magnificent Desolation: Walking on the Moon 3D. The IMAX 3D film, which invites movie-goers to join the twelve brave astronauts that have walked on the moon, opened to broad critical praise. The film will have played in approximately 120 theatres, the widest ever for an IMAX release, when distribution shifts toward IMAX's institutional network later this month.

"IMAX's summer films were a huge audience draw, keeping IMAX theatres packed for months," continued Messrs. Gelfond and Wechsler. "While the industry continued to struggle with box office declines, our box office was up significantly, highlighting The IMAX Experience's ability to pull movie-goers back into theatres and Warner Bros.' experience in marketing this new release window."

On November 18th, IMAX will release Harry Potter and the Goblet of Fire: The IMAX Experience, the fourth installment of the immensely popular series and the second Harry Potter film to be digitally re-mastered in IMAX's format. The film, which has already begun to sell out shows across the IMAX theatre network several weeks in advance, will open on approximately 70 domestic IMAX screens, up from 49 screens for Harry Potter and the Prisoner of Azkaban: The IMAX Experience, which grossed over $200,000 per IMAX screen in 2004. Later this month, IMAX will re-release last year's run-away hit The Polar Express: The IMAX 3D Experience, timed to the marketing of the DVD release of the Warner Bros. Pictures' holiday film.

The Company's 2006 film portfolio is filling in rapidly, with five films already confirmed for next year. Today, IMAX announced that two of next year's big Hollywood blockbusters will be digitally re-mastered for release in IMAX's format simultaneous with the conventional domestic release next summer. In May, Poseidon: The IMAX Experience, an update on the 1972 classic tale of a capsized ocean liner, will crash into IMAX theatres world-wide. On its heels, Superman Returns: The IMAX Experience, takes flight as the superhero makes his much anticipated, first feature film appearance in nearly two decades.

In 2006, the Company's slate of 3D films is expected to be its best ever, with three IMAX 3D releases already confirmed. In August, along with Playtone Productions, Warner Bros. Pictures and DNA Productions, IMAX will release The Ant Bully: An IMAX 3D Experience. The CGI animated film from the director of the 2001 hit Jimmy Neutron: Boy Genius is based on the beloved children's book of the same name. In November, IMAX and Warner Bros' Pictures will release Happy Feet: An IMAX 3D Experience, a CGI animated musical-comedy about a special Emperor penguin from the director that delighted audiences by bringing Babe the pig to life. In addition, following the success of 2004's NASCAR 3D: The IMAX Experience, IMAX and Warner Bros. Pictures have again partnered on an original 3D production, Deep Sea 3D, for release in March.

"IMAX 3D is the most powerful and immersive 3D movie experience on the planet. In response to strong audience appetite, we are excited to present two of next year's biggest family event films on the world's biggest screens, in IMAX's unrivalled 3D format. Our film slate visibility is excellent, with five films locked in for 2006 release, versus just two at this time last year," concluded Messrs. Gelfond and Wechsler.

For the three months ended September 30, 2005, the Company's total revenues were $33.4 million, as compared to $31.8 million reported for the prior year period. Systems revenue was $20.2 million versus $21.3 million in the prior year period. The Company recognized revenue on six theatre systems which qualified as either sales or sales-type leases in the third quarters of both 2005 and 2004. In addition, the Company installed two theatre systems that qualified as operating leases, as part of the Company's joint venture arrangement with AMC Theatres, as compared to nil in the third quarter of 2004.

For the third quarter of 2005, film revenues were $8.0 million, as compared to $6.1 million in the third quarter of 2004. This included IMAX DMR revenues of $3.0 million, an increase of 31% from the third quarter of 2004. Theatre operations revenue increased to $4.3 million in the third quarter of 2005 from $3.7 million in the third quarter of 2004, due to an increase in average ticket price and overall attendance. Other revenue was $0.8 million in the third quarters of 2005 and 2004. The Company ended the September quarter with $34.3 million in cash and short term investments as compared to $20.7 million at the end of September 2004.

The Company reported net earnings of $0.05 per diluted share for the third quarter of 2005 and the third quarter of 2004. Earnings from continuing operations were $0.04 per diluted share in the third quarters of 2005 and 2004.

The Company will host a conference call to discuss these results at 8:30 AM ET. To access the call interested parties should call (913) 981-5540 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 8469154.

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 DMR technology. 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, 2005, there were 261 IMAX theatres operating in more than 38 countries.

IMAX(R), IMAX(R) 3D, IMAX DMR(R), IMAX(R) MPX(TM), and
The IMAX Experience(R) 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 deliveries, 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, 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, 2004 and in the subsequent reports filed by the Company with the Securities and Exchange Commission.

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,
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Revenue
IMAX systems $ 20,236 $ 21,309 $ 62,657 $ 57,811
Films 8,047 6,076 18,295 17,166
Theater operations 4,311 3,689 12,325 11,203
Other 780 753 2,343 2,276
---------- ---------- ---------- ----------
33,374 31,827 95,620 88,456
Costs of goods and services 17,600 17,356 47,832 47,014
---------- ---------- ---------- ----------
Gross margin 15,774 14,471 47,788 41,442

Selling, general and
administrative expenses 8,966 7,587 29,021 24,541
Research and development 890 1,019 2,429 3,034
Amortization of intangibles 164 240 481 545
Receivable provisions, net
of (recoveries) (310) 2 (468) (965)
---------- ---------- ---------- ----------
Earnings from operations 6,064 5,623 16,325 14,287

Interest income 243 439 741 664
Interest expense (4,185) (4,378) (12,584) (12,566)
Loss on retirement of notes - - - (784)
---------- ---------- ---------- ----------
Net earnings from continuing
operations before income taxes 2,122 1,684 4,482 1,601
Recovery of (provision for)
income taxes (202) (84) (681) 255
---------- ---------- ---------- ----------
Net earnings from continuing
operations 1,920 1,600 3,801 1,856
Net earnings from discontinued
operations 360 200 786 600
---------- ---------- ---------- ----------
Net earnings $ 2,280 $ 1,800 $ 4,587 $ 2,456
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Earnings per share:
Earnings per share - basic:
Net earnings from continuing
operations $ 0.05 $ 0.04 $ 0.10 $ 0.05
Net earnings from
discontinued operations $ 0.01 $ 0.01 $ 0.02 $ 0.01
---------- ---------- ---------- ----------
Net earnings $ 0.06 $ 0.05 $ 0.12 $ 0.06
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Earnings per share - diluted:
Net earnings from continuing
operations $ 0.04 $ 0.04 $ 0.09 $ 0.05
Net earnings from
discontinued operations $ 0.01 $ 0.01 $ 0.02 $ 0.01
---------- ---------- ---------- ----------
Net earnings $ 0.05 $ 0.05 $ 0.11 $ 0.06
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Weighted average number of
shares outstanding (000's):
Basic 40,025 39,316 39,800 39,310
Diluted 42,218 39,892 42,026 39,711

Additional disclosure:

Depreciation and amortization(1) 4,241 3,980 11,490 10,537

(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, 2005 (2004 - $0.3 million, $0.9 million)

CONDENSED CONSOLIDATED BALANCE SHEETS
In accordance with United States Generally Accepted Accounting Principles
(in thousands of U.S. dollars)

September 30,
2005 December 31,
(unaudited) 2004
------------- -------------
Assets
Cash and cash equivalents $ 22,052 $ 28,964
Short-term investments 12,232 -
Accounts receivable, net of allowance for
doubtful accounts of $7,198 (2004 - $8,390) 21,378 19,899
Financing receivables 61,189 59,492
Inventories 31,665 29,001
Prepaid expenses 5,121 2,279
Film assets 2,832 871
Fixed assets 28,258 28,712
Other assets 12,080 13,377
Deferred income taxes 6,470 6,171
Goodwill 39,027 39,027
Other intangible assets 2,991 3,060
------------- -------------
Total assets $ 245,295 $ 230,853
------------- -------------
------------- -------------

Liabilities
Accounts payable $ 6,821 $ 5,827
Accrued liabilities 55,574 56,897
Deferred revenue 57,246 50,505
Senior Notes due 2010 160,000 160,000
------------- -------------
Total liabilities 279,641 273,229
------------- -------------
------------- -------------

Shareholders' equity (deficit)
Capital stock - Common shares - no par value.
Authorized - unlimited number. Issued and
outstanding - 40,128,659 (2004 - 39,446,964) 121,260 116,281
Other equity 1,691 3,227
Deficit (156,358) (160,945)
Accumulated other comprehensive income (loss) (939) (939)
------------- -------------
Total shareholders' deficit (34,346) (42,376)
------------- -------------
Total liabilities and shareholders' equity
(deficit) $ 245,295 $ 230,853
------------- -------------
------------- -------------

Source: IMAX Corporation

CONTACT: Media: IMAX Corporation, New York, Romi Schutzer,
(212) 821-0144, rschutzer@imax.com; Entertainment Media: Newman & Company,
Los Angeles, Al Newman, (310) 278-1560, asn@newman-co.com; Analysts: IMAX
Corporation, New York, Cheryl Cramer, (212) 821-0121, ccramer@imax.com;
Business Media: Sloane & Company, New York, Whit Clay, (212) 446-1864,
wclay@sloanepr.com

-------
Profile: intent