IMAX Blames Bad Films For Dramatic 2Q Earnings Decline

UPDATE, 6:40 AM: In a conference call with analysts, CEO Rich Gelfond continued to talk up future opportunities while acknowledging that “like you we’re not happy” with recent box office sales. He’s talking to studios about making films available to IMAX venues before they open elsewhere and is “optimistic about obtaining a title in the not-too-distant future.” He’s also considering making a bigger bet on potential blockbusters by reducing the number of films IMAX shows each year. No decision has been made but “my own vote is for less (films) with longer lead times.” Gelfond also will change the mix of films IMAX runs: “Our audience is more of a fanboy-driven audience than a family-driven audience, so we are going to make an adjustment.” Gelfond says he’s excited about a new digital laser projection technology he hopes to introduce in 2013 that would brighten screen images and reduce costs on bulbs. He’s not sure, though, whether he’ll accomodate director Peter Jackson’s effort to have his upcoming film The Hobbit shown at 48 frames per second vs the industry average of 24 fps. “We’re in discussions with Warner as to whether it makes sense,” he says.

PREVIOUS, 4:55 AM: Not a happy quarter for IMAX. The large-screen theater company reported 2Q net income of $1.8M, down 86.5% vs the same period last year, on revenues of $57.2M, up 3%. After adjusting for stock compensation and deferred taxes, earnings came in at 7 cents a share — a big miss from the 20 cents that analysts forecast. The results “did not live up to our financial expectations,” CEO Rich Gelfond says. He adds that over the last six months “it appears that there were fewer blockbuster titles that are consistent with our brand than in the same period last year,” which included Avatar. He says he’s encouraged by recent ticket sales for Transformers and Harry Potter — and an increase in the number of orders to build IMAX theaters. Still, the company says that the disappointing early 2011 box office sales mean that cash flow for the year will be lower than it was last year although revenues are expected to be flat. Gelfond urges investors to focus on the prospect of long-term growth, saying that “the response to our brand and the significant progress we continue to make on expanding our global network are powerful forces.”

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