Further fallout in the Large Format cinema sector is being predicted, following the news that IMAX Corporation has slashed 13% of its 1000-strong workforce.
The job cuts come as part of a broader corporate restructuring plan, according to the company, which involves the consolidation of the manufacturing of sound and projection systems at its Ontario site. Most of the job losses will come from the US, with IMAX scaling back operations at its facility in Alabama.
In a statement, co-CEO's Richard L Gelfond and Bradley J Wechsler said: "These measures were necessary to improve IMAX's operating results and in response to the financial difficulties in the commercial exhibition industry. While it's disheartening to lay off valued members of the IMAX team, we believe that these measures will ultimately improve shareholder value and we remain optimistic about IMAX's future."
Despite early success in 2000 with the exclusive release of Fantasia 2000: The IMAX Experience, which grossed a hefty $64.4m worldwide in only 75 theatres, the rest of the year proved more difficult for the publicly-traded Canadian company.
In October, IMAX's share price plummeted by more than 70% after the company issued a third quarter profits warning. And in November, the company abandoned plans to produce a 3-D version of the animated DreamWorks feature Shrek, reasoning that the 3-D adaptation would prove "diseconomic".
The Toronto-based widescreen filmmaker, cinema operator and film equipment technology company has seen its share price plunge from a 52-week high of $29.44 last August to a 52-week low of $2.50 in December. Further, IMAX's search for a buyer or merger partner foundered in the wake of the US exhibition crisis.
The company will take an unspecified charge for re-structuring costs in its first quarter. Last month, IMAX announced it would miss fourth quarter projections because US exhibitor bankruptcies have reduced demand for its products. It is also believed to be making provision for bad debt.
Credit Suisse First Boston said in a recent report there is "significant asset value" in IMAX, but a capital-intensive business model and a recent unsuccessful effort to sell the company leave "IMAX management backed into a corner with few strategic resources and limited capital resources." IMAX must be sold to a "larger and better capitalized entertainment industry operator or technology products maker."
As of the end of September last year, there were over 220 IMAX theatres operating in 28 countries around the world.
Meanwhile, rival company, Iwerks Entertainment, which, in addition to its Large Format Theatres, also produces simulated thrill-rides, 3-D screen theatres and is involved in film production, is equally threatened.
Founded in 1986 by Don Iwerks, a former Walt Disney Co. engineer, the company has not shown a profit in most fiscal years.
After its languishing share price caused it to be removed from the Nasdaq stock exchange last November, Iwerks' attempt to secure funding from S. Kumars Group of Bombay, India, collapsed in January, as US exhibition faltered and majors began to seek bankruptcy protection amid industry overcapacity.
This month, Iwerks Entertainment announced its second quarter and six month results for fiscal year 2001. Revenues for the second quarter were $6,780,000 as compared with $9,159,000 for the same quarter last year. The second quarter net loss was $184,000 or $.05 per share compared with $1,883,000 or $.55 per share for the same period last year. Revenues for the six months ended December. 31, 2000 were $11,692,000 as compared with $16,768,000 for the same period last year. The six months ended December. 31, 2000 net loss was $1,406,000 or $.41 per share as compared with $3,454,000 or $1.00 per share for the same period last year.