IMAX Corporation reports second quarter 2008 financial results; announces first digital systems installed & roll out is on track



    
    HIGHLIGHTS
    ----------
    -   IMAX remains on track to install approximately 50 digital systems by
        year-end

    -   Summer blockbuster The Dark Knight: The IMAX Experience has grossed
        over $32 million, sets new IMAX DMR(R) 2D record

    -   Completes 2008 film slate with DreamWorks Pictures/Paramount's
        Eagle Eye for September/October time period

    -   Adds Three Films to 2009 Film Slate: Watchmen; Night at the Museum 2:
        Escape to the Smithsonian; and Transformers: Revenge of the Fallen

    -   Company signs first international joint venture agreements

    -   Ends second quarter with record backlog of 246 theatre systems driven
        by joint revenue sharing model
    

    TORONTO, Aug. 7 /CNW/ - IMAX Corporation (NASDAQ:   IMAX; TSX: IMX) today
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
        upgrades.
    -   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
        2007.
    -   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
        2007.
    

    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(R)."
    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.
    The Company will host a conference call this morning at 8:30 AM ET. To
access the call, interested parties should call (866) 322-2356 approximately
10 minutes before it begins. International callers should dial (416) 642-3405.
A recording of the call will be available by dialing (647) 436-0148. The code
for both the live call and the replay is 6855424. The Company will also host a
webcast of the conference call, which can be accessed on www.imax.com by
clicking on 'Company Info' and then 'Investor Relations.'

    About IMAX Corporation

    IMAX Corporation is one of the world's leading entertainment technology
companies, specializing in digital and film-based motion picture technologies.
The worldwide IMAX network is among the most important and successful
theatrical distribution platforms for major event Hollywood films around the
globe, with IMAX theatres delivering the world's best cinematic presentations
using proprietary IMAX, IMAX(R) 3D, and IMAX DMR technology. IMAX DMR is the
Company's groundbreaking digital re-mastering technology that allows it to
digitally transform virtually any conventional motion picture into the
unparalleled image and sound quality of The IMAX Experience(R). IMAX's
renowned projectors display crystal-clear images on the world's biggest
screens, and the IMAX brand is recognized throughout the world for
extraordinary and immersive entertainment experiences for consumers. As of
June 30, 2008, there were 302 IMAX theatres operating in 40 countries.

    IMAX(R), IMAX(R) 3D, IMAX DMR(R), IMAX(R) MPX(R), 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 ongoing
discussions with the SEC and OSC relating to their ongoing inquiries and the
Company's accounting, the performance of films, the signing of theatre system
agreements, the viability of new technologies, businesses and products, 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, risks arising from potential material weaknesses in
internal control over financial reporting and fluctuations in foreign currency
and in the large format, general commercial exhibition and out-of-home
entertainment markets. These factors and other risks and uncertainties are
discussed in the Company's most recent Annual Report on Form 10-K and most
recent Quarterly Reports on Form 10-Q.



    
                               IMAX CORPORATION
               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     Six Months Ended
                                          June 30,              June 30,
                                   --------------------  --------------------
                                      2008       2007       2008       2007
                                   ---------  ---------  ---------  ---------
    Revenues
    Equipment and product sales    $  4,237   $  6,781   $ 10,935   $ 13,855
    Services                         13,607     15,941     27,814     33,242
    Rentals                           1,636      1,672      3,180      2,958
    Finance income                    1,084      1,181      2,155      2,367
    Other                               611      1,539        611      1,539
                                   ---------  ---------  ---------  ---------
                                     21,175     27,114     44,695     53,961
                                   ---------  ---------  ---------  ---------
    Cost of goods sold, services
     and rentals
    Equipment and product sales       2,966      3,813      5,931      7,756
    Services                         11,275     10,240     20,964     21,043
    Rentals                             968        731      1,698      1,291
    Other                                98         19         98         19
                                   ---------  ---------  ---------  ---------
                                     15,307     14,803     28,691     30,109
                                   ---------  ---------  ---------  ---------
    Gross margin                      5,868     12,311     16,004     23,852
    Selling, general and
     administrative expenses         11,252     11,147     23,639     21,469
    Research and development          2,047      1,121      4,535      2,616
    Amortization of intangibles         137        141        271        277
    Receivable provisions net of
     (recoveries)                       101        (31)       849        (25)
                                   ---------  ---------  ---------  ---------
    Loss from operations             (7,669)       (67)   (13,290)      (485)
    Interest income                      74        227        200        453
    Interest expense                 (4,340)    (4,375)    (8,836)    (8,624)
                                   ---------  ---------  ---------  ---------
    Loss from continuing operations
     before income                  (11,935)    (4,215)   (21,926)    (8,656)
    Provision for income taxes         (258)      (260)      (526)      (427)
                                   ---------  ---------  ---------  ---------
    Loss from continuing
     operations                     (12,193)    (4,475)   (22,452)    (9,083)
    Loss from discontinued
     operations                           -        (58)         -       (191)
                                   ---------  ---------  ---------  ---------
    Net loss                       $(12,193)  $ (4,533)  $(22,452)  $ (9,274)
                                   ---------  ---------  ---------  ---------
                                   ---------  ---------  ---------  ---------

    Loss per share
    Loss per share -
     basic & diluted:
      Net loss from continuing
       operations                  $  (0.29)  $  (0.11)  $  (0.54)  $  (0.23)
      Net loss from discontinued
       operations                         -          -          -          -
                                   ---------  ---------  ---------  ---------
      Net loss                     $  (0.29)  $  (0.11)  $  (0.54)  $  (0.23)
                                   ---------  ---------  ---------  ---------
                                   ---------  ---------  ---------  ---------

    Weighted average number of
     shares outstanding (000's):
      Basic                          42,181     40,287     41,313     40,286
      Diluted                        42,181     40,287     41,313     40,286


    Additional disclosure:

    Depreciation and
     amortization(1)               $  4,069   $  3,240   $  8,272   $  6,254

    (1) Includes $0.4 million and $0.7 million in amortization of deferred
        financing costs charged to interest expense for the three and
        six months ended June 30, 2008 (2007 - $0.3 million, $0.6 million)



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

                                                       June 30,  December 31,
                                                          2008          2007
                                                    -----------   -----------
                                                    (unaudited)
    Assets
    Cash and cash equivalents                        $  24,622     $  16,901
    Accounts receivable, net of allowance for
     doubtful accounts of $2,976 (2007 - $3,045)        22,202        25,505
    Financing receivables                               57,572        59,092
    Inventories                                         21,482        22,050
    Prepaid expenses                                     2,950         2,187
    Film assets                                          4,064         2,042
    Property, plant and equipment                       25,751        23,708
    Other assets                                        16,403        15,093
    Goodwill                                            39,027        39,027
    Other intangible assets                              2,366         2,377
                                                    -----------   -----------
      Total assets                                   $ 216,439     $ 207,982
                                                    -----------   -----------
                                                    -----------   -----------

    Liabilities
    Accounts payable                                 $  11,060     $  12,300
    Accrued liabilities                                 64,438        61,967
    Deferred revenue                                    69,729        59,085
    Senior Notes due 2010                              160,000       160,000
                                                    -----------   -----------
      Total liabilities                                305,227       293,352
                                                    -----------   -----------
    Commitments and contingencies
    Shareholders' deficiency
    Capital stock common shares - no par value.
     Authorized - unlimited number. Issued and
     outstanding - 43,415,052 (2007 - 40,423,074)      141,267       122,455
    Other equity                                         4,400         4,088
    Deficit                                           (235,859)     (213,407)
    Accumulated other comprehensive income               1,404         1,494
                                                    -----------   -----------
      Total shareholders' deficiency                   (88,788)      (85,370)
                                                    -----------   -----------
      Total liabilities and shareholders'
       deficiency                                    $ 216,439     $ 207,982
                                                    -----------   -----------
                                                    -----------   -----------



                               IMAX CORPORATION
                           SELECTED FINANCIAL DATA
    In accordance with United States Generally Accepted Accounting Principles
                       (in thousands of U.S. dollars)
                                 (unaudited)

    The Company has six reportable segments identified by category of product
    sold or service provided: IMAX systems; film production and IMAX DMR;
    film distribution; film post-production; theater operations; and other.
    The IMAX systems segment designs, manufactures, sells or leases and
    maintains IMAX theater projection system equipment. The film production
    and IMAX DMR segment produces films and performs film re-mastering
    services. The film distribution segment distributes films for which the
    Company has distribution rights. The film post-production segment
    provides film post-production and film print services. The theater
    operations segment owns and operates certain IMAX theaters.


                                    Three Months Ended     Six Months Ended
                                          June 30,              June 30,
                                   --------------------  --------------------
                                      2008       2007       2008       2007
                                   ---------  ---------  ---------  ---------
    Revenue
    IMAX systems                   $ 10,566   $ 13,984   $ 23,055   $ 27,102
    Films
      Production and IMAX DMR         2,489      3,801      5,405      8,393
      Distribution                    2,307      2,692      5,060      6,102
      Post-production                 1,798      1,472      3,522      2,546
    Theater operations                3,163      4,179      5,994      8,310
    Other                               852        986      1,659      1,508
                                   ---------  ---------  ---------  ---------
    Total                          $ 21,175   $ 27,114   $ 44,695   $ 53,961
                                   ---------  ---------  ---------  ---------
                                   ---------  ---------  ---------  ---------

    Gross margins
    IMAX systems                   $  4,871   $  8,077   $ 12,058   $ 15,642
    Films
      Production and IMAX DMR          (603)     1,545       (270)     3,927
      Distribution                      773        942      2,120      2,298
      Post-production                   834      1,132      2,386      1,234
    Theater operations                 (200)       517       (503)       844
    Other                               193         98        213        (93)
                                   ---------  ---------  ---------  ---------
    Total                          $  5,868   $ 12,311   $ 16,004   $ 23,852
                                   ---------  ---------  ---------  ---------
                                   ---------  ---------  ---------  ---------


                                                          June 30,  December
                                                             2008   31, 2007
                                                         ---------  ---------
    Assets
    IMAX systems                                         $167,799   $164,588
    Films
      Production and IMAX DMR                              23,602     26,073
      Distribution                                          5,384      5,239
      Post-production                                      13,660      5,094
    Theater operations                                      2,368      3,733
    Other                                                   3,626      3,255
                                                         ---------  ---------
    Total                                                $216,439   $207,982
                                                         ---------  ---------
                                                         ---------  ---------
    





For further information:

For further information: Media: IMAX Corporation, New York, Sarah
Gormley, (212) 821-0155, sgormley@imax.com; Entertainment Media: Rogers &
Cowan, Los Angeles, Elliot Fischoff, Jason Magner, (310) 854-8128,
jmagner@rogersandcowan.com; Investors: IMAX Corporation, New York, Heather
Anthony, (212) 821-0121, hanthony@imax.com; Business Media: Sloane & Company,
New York, Whit Clay, (212) 446-1864, wclay@sloanepr.com

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