TOP CONTRIBUTORS

Rusel Bruff

Jonathan J. Smith

IMAX AT A GLANCE

P/E ► -85.0   EV/EBITDA ► 31.1 LOW ROA ► 2.9% HIGH Debt to Equity ► 6.68 HIGH Current Ratio ► 1.87 AVG Interest Coverage Ratio ► 0.508 HIGH

 

 

 

 

 

 

IMAX Corporation, together with its wholly owned subsidiaries, is an entertainment technology company specializing in digital and film-based motion picture technologies and large-format, two-dimensional (2D) and three-dimensional (3D) film presentations. The Company's principal business is the design, manufacture, sale and lease of theater systems based on its technology for large-format, 15-perforation film frame, 70 millimeter format (15/70-format) theaters, including commercial theaters, museums and science centers, and destination entertainment sites. The majority of these theaters are operated by third parties. The Company generally does not own IMAX theaters, but licenses the use of its trademarks along with the sale or lease of its equipment. IMAX Corporation is also engaged in the production, digital re-mastering, post-production and distribution of 15/70-format films, the operation of IMAX theaters, and the provision of services in support of IMAX theaters and the IMAX theater network. In January 2008, the Company announced the sale of the Feinstein IMAX theatre in Providence, Rhode Island, to National Amusements, Inc.

The IMAX theater network had 299 theaters operating in 39 countries as of December 31, 2007. Of these 299 theaters, 179 are located in commercial locations, such as multiplex complexes, and 120 of them are located in institutional locations, such as museums and science centers. The Company derives its revenues from IMAX theater systems (the sale and lease of, and provision of services related to, its theater systems to large-format theaters, including joint revenue sharing arrangements), films (production and digital re-mastering of films, the distribution of film products to the IMAX theater network, post-production services for large-format films), theater operations (owning, operating, managing or participating in the profits of IMAX theaters) and other activities, which include the sale of after market parts and camera rentals.

Business Overview

Business Financials

Business Segments

IMAX Theater Systems

IMAX Corporation's primary products are its large-format theater systems. IMAX theater systems traditionally include a rolling loop 15/70-format projector; a six-channel, digital sound system delivering up to 12,000 watts; a screen with the Company's coating technology, and, if applicable, 3D glasses cleaning equipment. As part of the arrangement to sell or lease its theater systems, the Company provides advice on theater planning and design, and supervision of installation services. Theater systems are also leased or sold with a license for the use of the world famous IMAX brand. The Company primarily offers its theater systems in four configurations: the GT projection system for the largest IMAX theaters; the SR system for smaller theaters; the IMAX MPX system, which is targeted for multiplex complexes, and a fourth category of theater systems featuring heavily curved and tilted screens that are used in dome-shaped theaters. The GT, SR and IMAX MPX systems are flat screens that have a minimum of curvature and tilt, and can exhibit both 2D and 3D films, while the screen components in dome shaped theaters are generally 2D only.

IMAX Corporation's arrangements for theater system equipment involve either a lease or sale. As part of the arrangement for an IMAX theater system, the Company also advises the customer on theater design, supervises the installation of the theater systems and provides projectionists with training in using the equipment. Theater owners or operators are responsible for providing the theater location, the design and construction of the theater building, the installation of the system components and any other necessary improvements, as well as the marketing and programming at the theater. The supervision of installation requires that the equipment also be put through a complete functional start-up and test procedure to ensure proper operation. The Company's typical arrangement also includes the trademark license rights which commence on execution of the agreement and generally have terms of 10 to 20 years that may be renewed. For a separate fee, the Company provides ongoing maintenance and extended warranty services for the theater system.

IMAX and IMAX Dome systems make up approximately 36% of the Company's opened theater base. IMAX Dome theaters are designed for tilted dome screens. IMAX 3D theaters utilize a flat screen 3D system, which produces realistic three-dimensional images on an IMAX screen. To create the 3D effect, the audience uses either polarized or electronic glasses that separate the left-eye and right-eye images. The IMAX 3D projectors can project both 2D and 3D films, allowing theater owners the flexibility to exhibit either type of film. Since the introduction of IMAX 3D technology, the Company has upgraded 19 theaters.

IMAX MPX projects 15/70-format film onto screens, which are curved and tilted forward to further immerse the audience. An IMAX MPX theater system utilizes the Company's digital sound system components, capable of multi-channel uncompressed studio quality digital audio. The projector is capable of playing both 2D and 3D films, and installs into a standard 35 millimeter projection booth. The IMAX MPX system can be installed as part of a newly-constructed multiplex, as an add-on to an existing multiplex or as a retrofit of one or two existing stadium seat auditoriums within a multiplex. As of December 31, 2007, IMAX Corporation was in the process of developing a digitally based IMAX projector designed to deliver 2D and 3D presentations.

Films

Films produced by IMAX Corporation are typically financed through third parties, whereby it will generally receive a film production fee in exchange for producing the film and will be a distributor of the film. The ownership rights to such films may be held by the film sponsors, the film investors and/or IMAX Corporation. It has developed technology that makes it possible for 35millimeter live-action film to be digitally transformed into IMAX's 15/70-format. This system, known as IMAX DMR, has opened the IMAX theater network up to film releases from Hollywood's broad library of films. For IMAX DMR releases, the original soundtrack of the 35 millimeter film is also re-mastered for IMAX's five or six-channel digital sound system components.

During the year ended December 31, 2007, the Company released five films converted through the IMAX DMR process contemporaneously with the releases of the films to conventional 35 millimeters theaters and one DMR film released subsequent to the films 35mm theatrical release. In March 2007, the Company and Warner Bros. Pictures (WB) released 300: The IMAX Experience. In May 2007, the Company and Sony's Columbia Pictures released Spider-Man 3: The IMAX Experience. In July 2007, the Company, in conjunction with WB, released Harry Potter and the Order of the Phoenix: An IMAX 3D Experience. In September 2007, the Company, DreamWorks Pictures and Paramount Pictures released an IMAX DMR version of Transformers: The IMAX Experience. In November 2007, the Company in conjunction with Paramount Pictures, Shangri-La Entertainment and WB released Beowulf: An IMAX 3D Experience. On December 14, 2007, the Company and WB released the IMAX DMR version of I am Legend to IMAX theaters.

Other

The Company rents 2D and 3D 15/70-format analog cameras and provides technical and post-production services to third-party producers for a fee. It has developed dual and single filmstrip 3D cameras. The IMAX 3D camera simultaneously shoots left-eye and right-eye images and its compact size allows filmmakers access to a variety of locations, such as underwater or aboard aircraft. The Company maintains cameras and other film equipment to support third-party producers and also offers production advice and technical assistance to filmmakers.

Trends and Forces

Competition

Movie Theaters

• Regal Entertainment Group (RGC)
• AMC Entertainment (AC)
• Cinemark Holdings (CNK)

Film Makers

• Walt Disney Company (DIS)
• Dreamworks Animation SKG (DWA)
• Lions Gate Entertainment (LGF)

References