Imax swings to Q3 profit

Improved profitability as it moves to digital technology

TORONTO -- Giant screen exhibitor Imax Corp. on Wednesday swung to a third quarter profit as it sees momentum from its expanding theatre network and new digital projection model setting in.

Toronto-based Imax posted earnings of $1.1 million for the three months to Sept. 30, against a loss of $2.1 million in 2008, on revenue up sharply to $43.6 million, against a year-earlier $32.9 million.

The profit line included a 6 cent per-share employee compensation charge as the Imax stock price ran up during the latest quarter.

"We're beginning to deliver the financial value of our digital model with meaningful, consistent progress," Imax CEO Rich Gelfond told analysts as he predicted full-year 2009 profitability and increased earnings in 2010 on a larger theatre network and lower interest expense.

Improved profitability for Imax comes as it transitions from a film-based platform to digital projection technology, and introduces a joint venture theatre business model to spread its risks and costs.

The exhibitor saw theatre systems revenue rise 130% to $20.1 million, compared to a year-earlier $8.7 million, as Imax recognized revenue on 13 installed theatre systems, including five digital upgrades.

Revenue from joint-operated theatres rose 175% to $3.4 million as Imax installed six JV theatres, including one digital upgrade.

Imax currently has 107 JV theatre systems on stream within an international theatre network of 403 screens in 44 countries.

On the Hollywood and institutional movie front, the fuel for Imax' theatre network, third quarter film revenue came to $12.5 million, compared to $13.0 million in 2008. Production and DMR digital remastering revenue dipped to $7.8 million, against $9.2 million last year when Warner Bros.' "The Dark Knight" out-performed for Imax.

The Imax 2010 film slate includes James Cameron's "Avatar" carrying into the first quarter, Disney's "Alice in Wonderland," DreamWorks Animation's "How to Train Your Dragon" and Walt Disney Pictures' "Tron Legacy."

Imax has also penciled in two upcoming "Harry Potter" releases. The first, "Harry Potter and the Deathly Hallows: Part I," will be released on Nov. 19, 2010, and the second "Harry Potter and the Deathly Hallows: Part II" on July 15, 2011.

The exhibitor cautioned no distribution deal has yet been inked with Warner Bros.

On the financing front, Imax said it received commitment letter from Wachovia for a credit facility to $75 million to continue a debt recapitalization begun in early 2009 (HR, Oct. 2).

Imax also said it will oppose a lawsuit filed on Tuesday by Cinemark in an attempt to invalidate two of the giant screen exhibitors' patents.

"While we found this course of action surprising, we will vigorously defend all challenges to our patents and theatre rights," Gelfond told analysts.