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IMAX Reports Fourth Quarter and Full Year 2011 Financial Results

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IMAX Reports Fourth Quarter and Full Year 2011 Financial Results

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February 23, 2012—IMAX Corporation today reported its fourth quarter and full year 2011 financial results.

HIGHLIGHTS

Company Reports Q4 2011 Revenues of $66.7 million; Adjusted EPS of $0.14
Record Level of Theater Openings in 2011 Results in Year-over-Year Commercial Network Growth of 33%
Company Signs 200+ Theaters for Second Year in a Row
2012 Begins with the Addition of Several Titles to the Film Slate and Progress Across Key International Growth Initiatives

IMAX Corporation today reported fourth quarter 2011 revenues of $66.7 million, adjusted net income of $9.2 million, or $0.14 per diluted share, reported net income of $6.3 million, or $0.09 per diluted share, and adjusted EBITDA as calculated in accordance with the company's Credit Facility of $21.1 million. For reconciliations of adjusted net income to reported net income and for the definition of adjusted EBITDA, please see the tables at the end of this press release.

"Our fourth quarter financial results came in as expected and the year ended on a positive note with the success of Paramount's Mission: Impossible – Ghost Protocol, which was released five days early in IMAX," said IMAX Chief Executive Officer Richard L. Gelfond. "Overall, 2011 was highly productive from a strategic perspective. In addition to the success of Mission: Impossible, we made progress toward introducing best-in-class laser based projection technology, and grew our commercial network by 33%, installing a record 170 IMAX® theater systems. This strategic momentum has carried into 2012, as the recent WTO agreement with China, highlighting IMAX, should enhance programming flexibility in our biggest international market, and we have also made early progress toward igniting network growth in Latin America and Europe. While we are disappointed that 2011 did not meet our financial objectives, in 2012, we believe we are positioning ourselves for both financial and strategic success, through our continued focus on differentiation, executing on network growth, and creating a compelling film slate."

Network Growth Update

2011 marked the second year in a row in which IMAX signed contracts for over 200 theater systems, and a record year for both new theater signings and installations. The company signed contracts for a total of 209 theater systems in 2011 and installed 170 theater systems. In the fourth quarter of 2011, the company signed contracts for 26 theater systems and installed a record 57 theater systems. As of December 31, 2011, there were a total of 497 IMAX theaters installed in commercial multiplexes, which represents a 33% increase from the 373 theaters installed as of December 31, 2010. There were 263 theater systems in backlog as of December 31, 2011, compared to 224 systems in backlog as of December 31, 2010. For a breakdown of system signings, installations and backlog by type, please see the end of this press release.

"The rapid expansion of our network in 2011 was mostly driven by continued success in China, Russia and North America," said Mr. Gelfond. "In 2012, we are increasingly focused on igniting our growth in underpenetrated markets like South America, Western Europe and India. Our restructured master license agreement in South America is resulting in increased activity in that region of the world and we look forward to the opening of four new IMAX theaters in Brazil in the first half of this year. In addition, we believe the hiring of Andrew Cripps to lead our sales effort in EMEA should be a catalyst for our business in Western Europe, and our recent announcement of new IMAX theaters coming to India should contribute to our ability to release Bollywood titles in IMAX. All of these efforts should accelerate the expansion of our network in these strategically important regions of the world."

Network Growth Outlook

Based on theaters currently in backlog, the company expects to install 95 to 100 new theater systems in 2012 (45 to 50 under revenue sharing arrangements and approximately 50 under sales arrangements). Of the 95 to 100 new theaters expected to be installed in 2012, the company expects to install approximately 13 to 17 new theaters in the first quarter (7 to 9 under revenue sharing arrangements and 6 to 8 under sales arrangements). Current network growth outlook is based solely on theaters in backlog as of December 31, 2011 and does not include any theaters that may sign and install throughout the year. In 2011, 39% of the 137 new theaters installed were from theater agreements that were signed in 2011. The company cautions that installations can slip from period to period, usually for reasons beyond its control.

Fourth Quarter Segment Results

In the fourth quarter of 2011, IMAX systems revenue was $29.8 million, compared to $32.9 million in the fourth quarter of 2010, primarily reflecting the installation of 17 full, new theater systems in the most recent fourth quarter, compared to 20 full, new systems in the fourth quarter of 2010. The company also installed one digital upgrade in the fourth quarter of 2011, compared to seven in the same period last year.

Fourth quarter 2011 total film revenue was $18.1 million, compared to $18.0 million in the fourth quarter of 2010. Production and IMAX DMR® revenues were $12.3 million in the fourth quarter of 2011, versus $13.1 million in the year-ago period. Gross box office from DMR titles was $97.6 million in the fourth quarter of 2011, compared to $101.9 million in the fourth quarter of 2010. The average DMR box office per screen in the fourth quarter of 2011 was $221,600 ($184,900 domestic, $294,700 international).

"The highlight of the fourth quarter was the release of Paramount's Mission: Impossible – Ghost Protocol," added Mr. Gelfond. "The film featured scenes shot with IMAX cameras and utilized the early release in IMAX to build positive word of mouth, which helped lead to its status as the must see film of the holiday season. We look forward to an exciting lineup of films for 2012, anchored by key franchise titles including The Avengers, Men in Black 3, The Amazing Spider-Man, The Hobbit: An Unexpected Journey, Skyfall, and the highly anticipated finale of Christopher Nolan's Batman trilogy, The Dark Knight Rises, which will feature more footage shot in IMAX than any feature film to date. In addition to our Hollywood tentpole titles, in 2012 we plan to build on the success we have had with local releases in markets like China, and we believe we are now in a position to expand our offering of local content into other international territories, such as France and Russia."

In the fourth quarter of 2011, revenue from joint revenue sharing arrangements was $8.4 million, compared to $7.8 million in the prior-year period. During the quarter, the company installed 39 new theaters under joint revenue sharing arrangements, compared to 27 in the year-ago period. As of December 31, 2011, there were 257 IMAX theaters operating under joint revenue sharing arrangements, compared to 171 joint revenue sharing theaters open as of December 31, 2010.

Fourth quarter 2011 gross margin was $29.8 million, compared to $36.4 million in the fourth quarter of 2010, and as a percentage of revenues, gross margin was 44.7% in the quarter, versus 52.6% in the same period last year. Gross margin from DMR was negatively impacted by the purchase of more film prints on certain titles in the fourth quarter, versus last year.

Fourth quarter 2011 revenues were $66.7 million, adjusted net income was $9.2 million, or $0.14 per diluted share, reported net income was $6.3 million, or $0.09 per diluted share, and adjusted EBITDA as calculated in accordance with the company's Credit Facility was $21.1 million. Fourth quarter 2010 revenues were $69.2 million, adjusted net income was $14.3 million, or $0.21 per diluted share, reported net income was $54.2 million, or $0.80 per diluted share, which included a one-time, non-cash deferred tax benefit of $54.8 million, or $0.81 per diluted share, and adjusted EBITDA was $25.8 million.

For the full year ended December 31, 2011, total revenues were $236.6 million, adjusted net income was $27.3 million, or $0.40 per diluted share, reported net income was $15.5 million, or $0.23 per diluted share, and adjusted EBITDA as calculated in accordance with the company's Credit Facility was $67.7 million. For the full year ended December 31, 2010, total revenues were $248.6 million, adjusted net income was $67.8 million, or $1.02 per diluted share, reported net income was $100.8 million, or $1.51 per diluted share, and adjusted EBITDA was $101.4 million.

Mr. Gelfond concluded, "The strategic momentum of 2011 has continued here in the early weeks of 2012. We enter this new year with a commercial network that is substantially larger than it was a year ago, our mix between domestic and international theaters is moving toward higher-grossing international, and we believe our 2012 film slate reflects what our fans want to experience in IMAX. We believe the fundamentals of our business model – network expansion and higher revenue contribution coming from our higher margin businesses – should position us well for the long-term."

Additional Information

2012 DMR Films Announced to Date

To date, IMAX has announced 17 DMR titles that will play in the IMAX theatre network in 2012. The Company remains in discussions with virtually every studio regarding future titles and expects the total number of titles in 2012 to be similar to that in 2011. For periodic box office updates, please visit the corporate news section of www.imax.com.

Mission: Impossible – Ghost Protocol: The IMAX Experience (Paramount, cont'd from 2011);
Underworld: Awakening: An IMAX 3D Experience (Sony, January 2012);
Journey 2: The Mysterious Island: An IMAX 3D Experience (WB, February 2012);
The Lorax: An IMAX 3D Experience (Universal, March 2012);
John Carter: An IMAX 3D Experience (Disney, March 2012);
The Hunger Games: The IMAX Experience (Lionsgate, March 2012);
Wrath of the Titans: An IMAX 3D Experience (WB, March 2012);
HOUBA! On the Trail of the Marsupilami: The IMAX Experience (Chez WAM, Pathe Distribution, April 2012, France only);
The Avengers: An IMAX 3D Experience (Disney, Marvel, May 2012);
Dark Shadows: The IMAX Experience (WB, May 2012);
Men in Black III: An IMAX 3D Experience (Sony, May 2012);
The Amazing Spider-Man: An IMAX 3D Experience (Sony, July 2012);
The Dark Knight Rises: The IMAX Experience (WB, July 2012);
Skyfall: The IMAX Experience (Sony, November 2012);
Gravity: An IMAX 3D Experience (WB, November 2012);
Chinese Zodiac: The IMAX Experience (JCE Entertainment Ltd., Huayi Brothers & Emperor Motion Pictures, December 2012, int'l only); and
The Hobbit: An Unexpected Journey: An IMAX 3D Experience (WB, December 2012).

Theatre System Signings

In the fourth quarter of 2011, the Company signed contracts for 24 new theatre systems (11 under joint revenue sharing arrangements and 13 under sales and sales-type lease arrangements) and 2 digital and other upgrades, for a total of 26 theatre system signings. In the fourth quarter of 2010, the Company signed contracts for 9 new theatre systems (4 under joint revenue sharing arrangements and 5 under sales and sales-type lease arrangements) and 14 digital and other upgrades, for a total of 23 theatre system signings.

For the full year of 2011, the Company signed contracts for a record 190 new theatre systems (132 under joint revenue sharing arrangements and 58 under sales and sales-type lease arrangements) and 19 digital and other upgrades, for a total of 209 theatre system signings. For the full year of 2010, the Company signed contracts for 166 new theatre systems (71 under joint revenue sharing arrangements and 95 under sales and sales-type lease arrangements) and 55 digital and other upgrades, for a total of 221 theatre system signings.

Theatre System Installations

In the fourth quarter of 2011, the Company installed a record 56 new theatre systems (39 under joint revenue sharing arrangements and 17 under sales and sales-type lease arrangements) and 1 digital upgrade, for a total of 57 theatre system installations. In the fourth quarter of 2010, the Company installed 47 new theatre systems (27 under joint revenue sharing arrangements and 20 under sales and sales-type lease arrangements) and 7 digital upgrades, for a total of 54 theatre system installations.

For the full year of 2011, the Company installed a record 137 new theatre systems (86 under joint revenue sharing arrangements and 51 under sales and sales-type lease arrangements) and 33 digital upgrades, for a total of 170 theatre system installations. For the full year of 2010, the Company installed 91 new theatre systems (54 under joint revenue sharing arrangements and 37 under sales and sales-type lease arrangements) and 32 digital upgrades, for a total of 123 theatre system installations.

Theatre System Backlog

As of December 31, 2011, the Company's theatre backlog consisted of 263 theatre systems (119 under joint revenue sharing arrangements and 144 under sales and sales-type lease arrangements, 10 of which were systems designated for digital upgrades). As of December 31, 2010, the Company's theatre backlog consisted of 224 systems (59 under joint revenue sharing arrangements and 165 under sales and sales-type lease arrangements, 25 of which were systems designated for digital upgrades).

Source: IMAX Corporation