TORONTO — Despite what may be the large-format film company’s worst year ever, Toronto-based Imax put on an upbeat show for analysts Thursday, promising that a turnaround strategy already in place will take the company into the black in 2002.
Last year was disastrous one in which the company put itself up for sale, then had to change its plan after its share price plummeted from about $30 on the Nasdaq to less than $5. Exhibitor woes and changed accounting practices hit the company hard in the pocketbook, as well, with charges that include a $34.7 million writedown of assets and uncollectable debts owed by beleaguered exhibs and one-time charges totaling $61.1 million.
Imax posted $92.9 million in red ink on the year on revenues of $219.5 million.
Nonetheless, “Imax remains financially and operationally sound,” co-CEO Brad Wechsler told his audience in a news conference. Analysts can expect a turnaround to begin this year.
“We believe we will be well positioned to return to profitability on an EPS basis in 2002,” said co-CEO Rich Gelfond.
Digital, mainstream pic strategy
Key for Imax are its growing digital division, DPI, whose overhead costs promise to be much lower than those for large-screen film product, and its commercial repositioning strategy, through which it hopes to attract larger audiences and subsequently more exhibitors by providing more mainstream films, both original Imax films and conversions from 35mm.
Revenues on the year were up 8% to $219.5 million as a full year of DPI revenues offset a decline in system and film revenues. Company’s changed accounting practices mean that it recognizes revenue upon installation, as opposed to the delivery of Imax systems in previous years. As a result, Imax recognized revenue on 24 systems vs. 35 the year before.
Exhibitors’ woes drew film revenue down 12% at $41.7 million “due to a decline in post-production revenues and due to the timing and performance of films released in the year,” the company said.
On the brighter side, Wechsler and Gelfond pointed to a deal inked last month under which the Walt Disney Co. is converting into 2D Imax format the animated classic “Beauty and the Beast” for release next March, as well as four other collaborative projects.
“Disney is the first studio to make a major commitment to Imax,” said Wechsler. “This is a powerful motivator to other studios.”
Gelfond pointed out that 35mm films such as “Gladiator” screened in Imax theaters tend to draw better than in regular theaters, despite their slightly “fuzzy” look, and noted that the audience appeal of these “event” pics has the company working to lower the cost of converting 35mm films into Imax’s large-screen format. He predicted that they’re about 12 months away.
John Davison, the company’s prexy, chief operating officer and chief financial officer, announced that he is leaving Imax in June. Company is recruiting a CFO but leaving the other posts vacant for the moment. The stock market was unimpressed with Imax’s year end, with shares dropping 5.66% on the Nasdaq to close at $3.13.