SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 10, 1998
IWERKS ENTERTAINMENT, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-22558 95-4439361
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
4540 West Valerio Street
Burbank, California 91505-1045
(Address of Principal Executive Offices)
(818) 841-7766
(Registrant's Telephone Number)
<PAGE>
ITEM 5. OTHER EVENTS
Reference is made to the press release of Registrant, issued on February
10, 1998, which contains information meeting the requirements of this Item 5,
and which is incorporated herein by this reference. A copy of this press
release is attached to this Form 8-K as Exhibit 99.1.
Page 2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
February 10, 1998 IWERKS ENTERTAINMENT, INC.
By: /s/ Bruce Hinckley
---------------------------
Bruce Hinckley
Chief Financial Officer
Page 3
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EXHIBIT INDEX
Exhibits Page Number
- -------- -----------
99.1 Press Release dated February 10, 1998.
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LETTERHEAD OF IWERKS ENTERTAINMENT
FOR IMMEDIATE RELEASE
- ---------------------
Contact: Bruce Hinckley Krista Grossman
Chief Financial Officer Director
Iwerks Entertainment Bozell Sawyer Miller Group
(818) 955-7800 (310) 442-2516
IWERKS ENTERTAINMENT ANNOUNCES
FISCAL 1998 SECOND QUARTER RESULTS
--------------------------------------------------
Burbank, CA, February 10, 1998 -- Iwerks Entertainment, Inc. [NASDAQ NM:
IWRK] announced second quarter financial results for the period ended
December 31, 1997.
For the quarter, Iwerks reported a net loss of $(3.5) million, or $(0.29)
per share, on revenues of $6.0 million, compared with a net loss of
$(57,000), or $0.00 per share, on revenues of $10.0 million for the
comparable period a year ago.
For the six-month period ended December 31, 1997, Iwerks reported a net
loss of $(4.0) million, or $(0.33) per share, on revenues of $14.0 million,
compared with net income of $117,000, or $0.01 per share, on revenues of
$19.6 million for the comparable year-ago period. Results for the three
and six months ended December 31, 1997 include $218,000 and $531,000,
respectively, of costs associated with the previously announced merger
with Showscan Entertainment Inc.
Iwerks said that much of the revenue decline for the three- and six-month
periods was due to a decrease in hardware sales in Asia, which were down
$3.8 million and $5.4 million, respectively, from the comparable year-earlier
periods. Additionally, the company's touring revenue declined by $0.5
million in the quarter and $0.7 million for the six-month period ended
December 31, 1997. Iwerks said these decreases were partially offset by
minor increases in Americas hardware sales and film licensing revenues.
Iwerks said it expected the lower Asian hardware and touring sales trends
to continue for the foreseeable future.
Iwerks had announced on December 24, 1997 that it expected its revenues and
earnings for the second quarter to fall short of analyst estimates and prior
year results primarily due to significantly weakened sales in the Asia
Pacific region. Iwerks also announced on January 28, 1998 that it reduced
its workforce by approximately 13% in order to align the company's staffing
levels with the lower revenues and earnings.
(more)
<PAGE>
Iwerks Announces Second Quarter Results - Page 2
Roy A. Wright, Chairman and Chief Executive Officer of Iwerks, said, "As we
reported earlier in the quarter, the Asian economic crisis has had a
substantial impact on our hardware sales to that region. Subsequently, we
have embarked on a two-pronged strategy, which includes implementing
aggressive cost-cutting measures to bring our expenses in line with the
lower revenues, and a renewed focus on the domestic, European and Latin
American markets. Already, as the results show, we have experienced an
uptick in Americas sales as well as a slight increase in our film licensing
revenues."
Iwerks said that its gross profit margin for the three-month period had
decreased from 31% to 14%, due primarily to the company's inability to
reduce the fixed cost of touring operations at the same rate as touring
sponsorship revenue has declined.
The company's selling, general and administrative (SG&A) expenses increased
by $989,000 to $4.3 million for the second quarter, and increased by $1.2
million to $7.9 million for the six-month period. Iwerks said the increases
in SG&A expenses were due to higher expenses for marketing, research and
development costs, insurance and allowance for doubtful accounts. SG&A
figures do not include transaction-related charges in connection with the
previously announced merger with Showscan Entertainment, which equal
$218,000 and $531,000 for the three- and six-month periods, respectively.
Iwerks said that it anticipates that its annual meeting of shareholders
will be held in March 1998, at which time shareholders will vote on the
company's proposed merger with Showscan. Iwerks and Showscan announced
their intention to merge in August 1997, and announced amended transaction
terms in December 1997. The combined company, which will bring together
the two largest motion simulation companies, will be the largest provider
of ride simulation entertainment attractions and software in the world.
Iwerks Entertainment is one of the world's leading producers of high-tech,
multi-sensory experiences such as ride simulation, 2D and 3D giant screen
theaters, 360 degree video dance clubs and other immersive attractions.
Serving prestigious entertainment, information and marketing providers,
more than 250 Iwerks attractions can be found worldwide at location-based
entertainment centers, amusement parks, family entertainment centers,
shopping centers, casinos, resorts, nightclubs, restaurants, museums,
fairs, festivals and more.
(more)
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Iwerks Announces Second Quarter Results - Page 3
FORWARD-LOOKING STATEMENT DISCLOSURE
------------------------------------
This release contrans forward-looking statements which are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from
the forward-looking statements. Those risks include, but are not limited
to, the ongoing economic conditions and situation in the Asia Pacific
region, the level of available sales in the rest of the world, costs of
sales and the ability of the Company to maintain pricing levels necessary
to maintain gross profit margins, the successful consummation and
integration of the Company pending its merger with Showscan, the level
of selling, general administrative costs, the performance of the Company
under existing purchase contracts and the ability to obtain new contracts,
the success of the Company's owned and operating strategy, the success of
the Company's film software and the effects of competition, as well as the
other "risk factors" set forth in the Company's filings with the Securities
and Exchange Commission. All forward-looking statements should be
considered in light of these risks and uncertainties.
(one page of tables attached)
###
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IWERKS ENTERTAINMENT, INC.
FINANCIAL HIGHLIGHTS
FISCAL 1998 SECOND QUARTER AND SIX-MONTH ENDED DECEMBER 31, 1997
(in 000s, except per share data)
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
December 31, 1997 June 30, 1997
(unaudited) (unaudited)
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue $ 5,989 $ 10,023 $ 14,041 $ 19,618
Cost and expense
Cost of Sales 5,168 6,955 9,957 13,192
Selling, General &
Administrative 4,311 3,322 7,916 6,703
Merger Related (a) 218 - 531 -
-------- -------- -------- --------
Total Cost 9,697 10,277 18,404 19,895
Interest income, net 208 197 357 394
-------- -------- -------- --------
Net income (loss) $(3,500) $ (57) $(4,006) $ 117
======== ======== ======== ========
Net income (loss)
per common share $ (0.29) $ 0.00 $ (0.33) $ 0.01
======== ======== ======== ========
Weighted average
shares outstanding 12,161 11,715 12,160 11,675
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1997 June 30, 1997
----------------- -------------
(unaudited) (unaudited)
<S> <C> <C>
ASSETS
Cash and marketable securities $ 17,380 $ 19,067
Other current assets 9,677 16,188
Properties and Film Inventory, net 12,554 10,377
Goodwill 15,064 15,367
Other assets 3,185 3,530
--------- ---------
Total assets $ 57,850 $ 64,529
========= =========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities $ 11,959 $ 14,316
Long-term liabilities 1,511 1,827
Stockholders' equity 44,380 48,386
--------- ---------
Total liabilities and
stockholders' equity $ 57,850 $ 64,529
========= =========
(a) Costs associated with the pending merger of Showscan Entertainment, Inc.
</TABLE>
