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IMAX Corporation Reports Third Quarter 2008 Financial Results

November 6, 2008

TORONTO, Nov. 6 /PRNewswire-FirstCall/ — IMAX Corporation (NASDAQ: IMAX; TSX: IMX) today reported improved year-over-year financial results, that its digital projection system roll-out is on track and that it continues to add to its future film slate. The Company generated operating income of $2.5 million in the third quarter, which represents a $5.3 million increase compared to the prior year period’s operating loss of $2.8 million, and significant improvement on a sequential basis compared to the first half of 2008. The Company’s net loss per share of $0.05 for the third quarter of fiscal 2008 represents an improvement as compared to a net loss of $0.19 per share for the third quarter of fiscal 2007, and as compared to recent quarters. At the end of the quarter, the Company’s cash position was $37.6 million, compared to cash and short-term investments of $16.9 million as of December 31, 2007, and $18.2 million as of September 30, 2007.

IMAX Co-Chairmen and Co-CEOs Richard L. Gelfond and Bradley J. Wechsler commented, “Our digital transition is progressing as anticipated and we believe the seeds of our financial turnaround are beginning to take root. During the quarter, we feel we demonstrated that the key drivers of our business – our transition to digital, our transition to a recurring cash flow joint revenue sharing model and our ability to finance the roll-out of our digital systems – are fundamentally on track. In a difficult environment, we delivered improved financial results, which primarily reflect the strength of The Dark Knight: The IMAX Experience, coupled with operating expenses that were flat versus last year. We are encouraged by our third quarter performance, we believe we have the necessary funding to continue to roll-out our digital theatre systems, our future film slate is strong and we continue to expect profitability in 2009.”

During the quarter, the Company officially commenced the roll out of its IMAX digital system technology, as scheduled, with the successful delivery and installation of 14 digital projection systems at AMC Entertainment Inc. theatres across key markets such as New York, Washington DC, Baltimore, Philadelphia, Florida and Kansas City. Additional markets, such as Los Angeles and Houston, have opened subsequent to quarter-end and the Company’s first digital projection systems under its joint revenue sharing agreement with Regal Cinemas were installed in October. Thirty-five digital systems are currently installed and the Company is on track for approximately 45 digital systems to be in operation by year-end. Through the third quarter, the Company has signed contracts for 207 IMAX digital theatre systems, all in the past 20 months. Reflecting only those scheduled installations already in backlog, the Company estimates having between 115 and 125 joint revenue sharing systems in operation at the end of 2009.

Messrs. Gelfond and Wechsler continued, “The third quarter marked the beginning of our digital era. While still very early, we are encouraged by all aspects of the performance of our new IMAX digital systems: box office revenue generation, reliability, operational efficiency and consumer acceptance. The advent of IMAX digital eliminates high film print costs incurred by the studios and provides lower installation costs for exhibitors, allowing for greater programming flexibility. With digital we will have the ability to show 10 to 12 major studio releases per year, as opposed to six to eight historically, which should translate into higher revenue and greater per-theatre profitability.”

Turning to third quarter financial results, for the three months ended September 30, 2008, total revenues increased 13.2% to $33.5 million, as compared to $29.6 million reported for the prior year period.

   -   Systems revenue was $14.1 million versus $14.9 million in the prior       year period. The Company installed 18 theatre systems in the third       quarter, compared to six in the third quarter last year. Of the 18       installations, 14 were under joint revenue sharing arrangements for       which the Company does not recognize revenue on installation but       rather over time and one was an operating lease.   -   Film revenue increased to $13.0 million during the third quarter of       2008 versus $9.5 million in the third quarter of 2007. This included       IMAX DMR(R) revenues of $9.2 million compared to $6.2 million in the       prior year period.   -   Theatre operations and other revenue was $6.3 million in the third       quarter of 2008, compared to $5.1 million in the third quarter of       2007.   

In June, the Company released DreamWorks Animation’s Kung Fu Panda: The IMAX Experience, which grossed $3.8 million in IMAX(R) theatres worldwide in the third quarter and $12.2 million to date. In July, the Company released Warner Brothers Pictures’ The Dark Knight: The IMAX Experience which has grossed $60.2 million in IMAX theatres worldwide as of quarter end and $62.1 million worldwide to date, for a box office per screen average in IMAX of $410,000. On September 26, the Company released DreamWorks Pictures’ Eagle Eye: The IMAX Experience which has grossed $6.7 million worldwide in IMAX theatres to date.

“Our third quarter film performance was led by the worldwide strength of The Dark Knight, which featured visionary director Chris Nolan’s groundbreaking use of IMAX cameras. Audiences filled IMAX theatres to see this terrific film, and many came back more than once to see the IMAX version again. In a difficult macro-economic environment, the IMAX release of Eagle Eye has indexed in line with our historical average, demonstrating that consumers continue to visit their local multiplexes and continue to pay a premium for The IMAX Experience(R).”

Selling, general and administrative expenses were relatively flat to last year at $10.5 million in the third quarter compared to $10.3 million in the same period a year ago. Research and development costs were $1.6 million in the third quarter of 2008, flat as compared the third quarter of 2008.

The Company remains confident that the combination of its cash position, available credit, and operating cash flows will provide for the necessary funding of its joint revenue sharing digital projection systems. As mentioned above, as of September 30, 2008, the Company’s cash position was $37.6 million compared to cash and short-term investments of $16.9 million as of December 31, 2007, and $18.2 million as of September 30, 2007. The Company’s increased cash position includes the private placement of approximately 2.73 million common shares in May of this year at market prices, and resulting proceeds of approximately $18.0 million. In addition, the Company’s cash position reflects the conservative and strategic decision to draw $20.0 million of its credit facility during the quarter. The Company has access to another $10.0 million on its credit facility, in accordance with its senior notes and its credit facility.

Offsetting the Company’s cash position was an approximate $6.0 million investment in the quarter related to equipment purchases for its joint revenue sharing digital projection systems and $9.6 million for the nine month period, which is on plan.

The Company signed agreements for 11 IMAX theatre systems in the third quarter of fiscal 2008 compared to agreements for 18 IMAX theatre systems in the third quarter of 2007. At the end of the third quarter, the Company’s backlog consisted of 238 theatre systems compared to 90 theatre systems in backlog at the end of last year’s third quarter. Included in the 2008 and 2007 system backlog totals were 132 and seven joint revenue sharing arrangements, respectively, for which there is no assigned backlog value.

“Exhibitor interest in our joint revenue sharing model continues, evidenced by our healthy level of signings in the quarter. At the end of the third quarter, 26 IMAX theatres were operating under the JV model, compared to nine last year. Our joint revenue sharing business model makes it significantly more affordable and less capital intensive for exhibitors to be in the IMAX business while potentially driving greater recurring revenue into our business. Joint revenue sharing systems that have been open for over a year are currently generating initial rates of return of approximately 40% even before taking film revenue into consideration,” said Messrs. Gelfond and Wechsler.

Regarding its remaining 2008 film slate, IMAX has partnered with DreamWorks Animation to release Madagascar: Escape 2 Africa: The IMAX Experience, for an approximate five-week run beginning tomorrow, which will be followed by Twentieth Century Fox’s The Day the Earth Stood Still: The IMAX Experience, which will be released on December 12, 2008.

The Company also announced this morning that it has reached agreement on material terms with Twentieth Century Fox to release the highly anticipated 3D motion picture Avatar, directed by Academy Award(R) winner James Cameron, on December 18, 2009. The film seeks to revolutionize live-action 3D moviemaking, and Cameron’s style of epic big-screen storytelling should be well suited to IMAX screens. Avatar marks Cameron’s return to Hollywood feature directing since helming 1997′s Titanic, the highest grossing film of all time and winner of eleven Oscars, including Best Picture. In addition, on January 23rd, the Company plans to re-release Warner Brothers’ blockbuster hit The Dark Knight in its IMAX film and digital theatres.

Messrs. Gelfond and Wechsler commented, “Our film slate is the fuel that drives our go-forward business model. We are very pleased with how 2009 is coming together and to be adding these two great films to our slate. Interest from studios and filmmakers in featuring major Hollywood releases in IMAX is at unprecedented levels, putting us on track to show at least nine films next year. We believe that the economics of being in the IMAX business are compelling to studios and to exhibitors, and that our history of strong box office performance, our ability to command a price premium and our brand becoming known for ‘event-type’ movie-going are all contributing to IMAX becoming a key element of many studios’ distribution strategies.”

The Company will host a conference call this morning at 8:30 AM ET. To access the call via phone, interested parties should dial (866) 322-8032 approximately 10 minutes before it begins. International callers should dial (416) 640-3406. A recording of the call will be available by dialing (888) 203-1112 or (647) 436-0148. The code for both the live call and the replay is 3247636. The Company will also host a webcast of the conference call, which can be accessed on http://www.imax.com/ by clicking on ‘Company Info’ and then ‘Investor Relations.’

About IMAX Corporation

IMAX Corporation is one of the world’s leading entertainment technology companies, specializing in digital and film-based motion picture technologies. The worldwide IMAX network is among the most important and successful theatrical distribution platforms for major event Hollywood films around the globe, with IMAX theatres delivering the world’s best cinematic presentations using proprietary IMAX, IMAX(R) 3D, and IMAX DMR(R) technology. IMAX DMR is the Company’s groundbreaking digital re-mastering technology that allows it to digitally transform virtually any conventional motion picture into the unparalleled image and sound quality of The IMAX Experience(R). IMAX’s renowned projectors display crystal-clear images on the world’s biggest screens, and the IMAX brand is recognized throughout the world for extraordinary and immersive entertainment experiences for consumers. As of September 30, 2008, there were 320 IMAX theatres operating in 42 countries.

IMAX(R), IMAX(R) 3D, IMAX DMR(R), IMAX(R) MPX(R), and The IMAX Experience(R) are trademarks of IMAX Corporation. More information on the Company can be found at http://www.imax.com/.

This press release contains forward looking statements that are based on management’s assumptions and existing information and involve certain risks and uncertainties which could cause actual results to differ materially from future results expressed or implied by such forward looking statements. Important factors that could affect these statements include ongoing discussions with the SEC and OSC relating to their ongoing inquiries and the Company’s accounting, the performance of films, the signing of theatre system agreements, the viability of new technologies, businesses and products, the timing of theatre system deliveries, the mix of theatre systems shipped, the timing of the recognition of revenues and expenses on film production and distribution agreements, risks arising from potential material weaknesses in internal control over financial reporting and fluctuations in foreign currency and in the large format, general commercial exhibition and out-of-home entertainment markets. These factors and other risks and uncertainties are discussed in the Company’s most recent Annual Report on Form 10-K and most recent Quarterly Reports on Form 10-Q.

                              IMAX CORPORATION              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS      In accordance with United States Generally Accepted Accounting                                Principles          (In thousands of U.S. dollars, except per share amounts)                                (Unaudited)                                       Three Months           Nine Months                                   Ended September 30,   Ended September 30,                                 --------------------- ---------------------                                    2008       2007       2008       2007                                 ---------- ---------- ---------- ----------   Revenues   Equipment and product sales.. $   7,154  $   7,871  $  18,089  $  21,727   Services.....................    22,702     17,736     50,515     50,977   Rentals......................     2,532      2,003      5,712      4,960   Finance income...............     1,079      1,208      3,234      3,576   Other........................         -        750        611      2,289                                 ---------- ---------- ---------- ----------                                    33,467     29,568     78,161     83,529                                 ---------- ---------- ---------- ----------   Cost of goods sold, services    and rentals   Equipment and product sales..     4,097      5,356     10,028     13,113   Services.....................    12,655     13,717     33,619     34,759   Rentals......................     1,691        613      3,388      1,904   Other........................         -         31         98         50                                 ---------- ---------- ---------- ----------                                    18,443     19,717     47,133     49,826                                 ---------- ---------- ---------- ----------   Gross margin.................    15,024      9,851     31,028     33,703   Selling, general and    administrative expenses.....    10,510     10,255     34,149     31,725   Research and development.....     1,619      1,563      6,155      4,180   Amortization of intangibles..       119        129        389        406   Receivable provisions net of    recoveries..................       265        718      1,114        693                                 ---------- ---------- ---------- ----------   Income (loss) from operations     2,511     (2,814)   (10,779)    (3,301)   Interest income..............        82        194        282        647   Interest expense.............    (4,471)    (4,341)   (13,307)   (12,965)                                 ---------- ---------- ---------- ----------   Loss from continuing    operations before income    taxes.......................    (1,878)    (6,961)   (23,804)   (15,619)   Provision for income taxes...      (229)      (383)      (755)      (810)                                 ---------- ---------- ---------- ----------   Loss from continuing    operations..................    (2,107)    (7,344)   (24,559)   (16,429)   Loss from discontinued    operations..................         -       (178)         -       (369)                                 ---------- ---------- ---------- ----------   Net loss..................... $  (2,107) $  (7,522) $ (24,559) $ (16,798)                                 ---------- ---------- ---------- ----------                                 ---------- ---------- ---------- ----------    Loss per share   Loss per share    - basic & diluted:     Net loss from continuing      operations................ $   (0.05) $   (0.18) $   (0.58) $   (0.41)     Net loss from discontinued      operations................         -      (0.01)         -      (0.01)                                 ---------- ---------- ---------- ----------     Net loss................... $   (0.05) $   (0.19) $   (0.58) $   (0.42)                                 ---------- ---------- ---------- ----------                                 ---------- ---------- ---------- ----------    Other comprehensive income    (loss) consists of:   Actuarial gain resulting from    pension amendment (net of    tax provision of $nil)...... $       -  $       -  $       -  $     997   Amortization of prior service    credits (net of tax    provision of $17 and $75 for    the three months ended    September 30, 2008 and 2007,    respectively, and $50 and    $224 for the nine months    ended September 30, 2008 and    2007, respectively)                (45)      (162)      (136)      (488)                                 ---------- ---------- ---------- ----------                                 $     (45) $    (162) $    (136) $     509                                 ---------- ---------- ---------- ----------                                 ---------- ---------- ---------- ----------    Weighted average number of    shares outstanding (000's):     Weighted average number of      shares used in computing      basic loss per share......    43,438     40,310     42,026     40,294                                 ---------- ---------- ---------- ----------     Weighted average number of      shares used in computing      diluted loss per share....    43,438     40,310     42,026     40,294                                 ---------- ---------- ---------- ----------                                 ---------- ---------- ---------- ----------   Additional disclosure:      Depreciation and      amortization(1)........... $   4,523  $   6,539  $  12,799  $  12,794    (1) Includes $0.4 million and $1.1 million of amortization of deferred       financing costs charged to interest expense for the three months and       nine months ended September 30, 2008 (September 30, 2007 -       $0.3 million and $0.9 million)                                 IMAX CORPORATION                   CONDENSED CONSOLIDATED BALANCE SHEETS      In accordance with United States Generally Accepted Accounting                                Principles                      (In thousands of U.S. dollars)                                                        September   December                                                           30,        31,                                                          2008       2007                                                       ---------- ----------                                                      (unaudited)   Assets   Cash and cash equivalents.......................... $  37,651  $  16,901   Accounts receivable, net of allowance for doubtful    accounts of $3,078 (2007 - $3,045)................    25,213     25,505   Financing receivables..............................    57,183     59,092   Inventories........................................    19,052     22,050   Prepaid expenses...................................     2,917      2,187   Film assets........................................     3,178      2,042   Property, plant and equipment......................    36,705     23,708   Other assets.......................................    15,048     15,093   Goodwill...........................................    39,027     39,027   Other intangible assets............................     2,310      2,377                                                       ---------- ----------     Total assets..................................... $ 238,284  $ 207,982                                                       ---------- ----------                                                       ---------- ----------   Liabilities   Bank indebtedness.................................. $  20,000  $       -   Accounts payable...................................    16,759     12,300   Accrued liabilities................................    64,544     61,967   Deferred revenue...................................    67,508     59,085   Senior Notes due 2010..............................   160,000    160,000                                                       ---------- ----------     Total liabilities................................   328,811    293,352                                                       ---------- ----------   Commitments and contingencies   Shareholders' deficiency   Capital stock common shares - no par value.    Authorized - unlimited number.     Issued and outstanding - 43,462,297      (2007 - 40,423,074).............................   141,505    122,455   Other equity.......................................     4,576      4,088   Deficit............................................  (237,966)  (213,407)   Accumulated other comprehensive income.............     1,358      1,494                                                       ---------- ----------     Total shareholders' deficiency...................   (90,527)   (85,370)                                                       ---------- ----------     Total liabilities and shareholders' deficiency... $ 238,284  $ 207,982                                                       ---------- ----------                                                       ---------- ----------                                IMAX CORPORATION                          SELECTED FINANCIAL DATA      In accordance with United States Generally Accepted Accounting                                Principles                      (in thousands of U.S. dollars)                                (unaudited)   

The Company has six reportable segments identified by category of product sold or service provided: IMAX systems; film production and IMAX DMR; film distribution; film post-production; theater operations; and other. The IMAX systems segment designs, manufactures, sells or leases and maintains IMAX theater projection system equipment. The film production and IMAX DMR segment produces films and performs film re-mastering services. The film distribution segment distributes films for which the Company has distribution rights. The film post-production segment provides film post-production and film print services. The theater operations segment owns and operates six IMAX theaters.

                                      Three Months           Nine Months                                   Ended September 30,   Ended September 30,                                 --------------------- ---------------------                                     2008       2007       2008       2007                                 ---------- ---------- ---------- ----------   Revenue   IMAX systems................. $  14,133  $  14,940  $  37,188  $  42,042   Films     Production and IMAX DMR....     9,174      6,246     14,580     14,640     Distribution...............     2,412      2,548      7,472      8,649     Post-production............     1,433        744      4,955      3,290     Theater operations.........     5,527      4,132     11,520     12,442     Other......................       788        958      2,446      2,466                                 ---------- ---------- ---------- ----------     Total...................... $  33,467  $  29,568  $  78,161  $  83,529                                 ---------- ---------- ---------- ----------                                 ---------- ---------- ---------- ----------     Gross margins     IMAX systems............... $   6,989  $   7,265  $  19,048  $  22,907     Films       Production and IMAX DMR..     6,282        290      6,012      4,218       Distribution.............       538      1,223      2,658      3,521       Post-production..........       355        295      2,740      1,529       Theater operations.......       809        440        307      1,283       Other....................        51        338        263        245                                 ---------- ---------- ---------- ----------       Total.................... $  15,024  $   9,851  $  31,028  $  33,703                                 ---------- ---------- ---------- ----------                                 ---------- ---------- ---------- ----------                                                         September  December                                                           30,        31,                                                          2008       2007                                                       ---------- ----------   Assets   IMAX systems....................................... $ 182,341  $ 164,588   Films     Production and IMAX DMR..........................    32,837     26,073     Distribution.....................................     6,416      5,239     Post-production..................................    10,697      5,094     Theater operations...............................     3,178      3,733     Other............................................     2,815      3,255                                                       ---------- ----------     Total............................................ $ 238,284  $ 207,982                                                       ---------- ----------                                                       ---------- ----------  

IMAX Corporation

CONTACT: Media: IMAX Corporation, New York, Sarah Gormley, (212)821-0155, sgormley@imax.com; Entertainment Media: Rogers & Cowan, Los Angeles,Elliot Fischoff/Jason Magner, (310) 854-8128, jmagner@rogersandcowan.com;Investors: IMAX Corporation, New York, Heather Anthony, (212) 821-0121,hanthony@imax.com; Business Media: Sloane & Company, New York, Whit Clay,(212) 446-1864, wclay@sloanepr.com




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