After four consecutive quarters of declining per-screen attendance — and a fifth one likely — Imax CEO Rich Gelfond pulled the trigger today on a plan to cut 100 full-time positions, about 14% of the global workforce for Imax and Imax China.
The company says it will take a $15 million restructuring and impairment charge for the move, including $11 million to be recorded in the Q2 earnings. Financial benefits from the layoffs, estimated at $20 million a year, should start to show in Q3.
Gelfond warned Wall Street at a gathering last month that he planned to cut outlays. Last week, Benchmark Co’s Mike Hickey, in downgrading his recommendation for Imax shares to “hold” from “buy,” said he anticipated “a headcount reduction of at least 10% as part of a cost reduction plan.”
Imax shares have lost nearly 23.6% of their value so far in 2017.
But while delivering pink slips to employees, Gelfond hopes to please investors: Along with the job loss announcement, the large-screen exhibition company says it has authorized a $200 million share repurchase plan.
This will follow a $200 million authorization from 2014 that concludes this month. It cut the number of outstanding shares by 4%.
“A more streamlined cost structure will enable us to scale our business with increased efficiency and facilitate operating leverage during both strong and weak periods of box office,” Gelfond says. “It also affords us the bandwidth to pursue important new initiatives, including original content and virtual reality.”
Hickey said last week that he suspects “the elevated enthusiasm movie goers have for recliner installations has shifted share away from Imax.”
If theaters respond by reducing the number of seats in Imax venues to accommodate recliners, then it could create a “predicament” for the company, the analyst added. Although it would respond to the competitive threat, it also “could have a detrimental and lasting negative impact on [per screen attendance].”