Imax Corp (IMAX) 2002 Q3 法說會逐字稿

Welcome to the IMAX conference call.

This call is being recorded.

At this time, I would like to turn the call over to Mr. Brad Wechsler. Please go ahead, sir.

Thank you, operator, and thank you all for joining us today. With me today is my partner and co-CEO Rich Gelfond; Frank Joyce (ph), our Chief Financial Officer; and Steve Abraham (ph), Head of IR.

Before we begin, our lawyers have asked to me to read the following forward-looking statement language. Our comments and answers to your questions on this call might include statements that are forward-looking, in that they address future results or occurrences. Actual future results and occurrences may differ materially from these forward-looking statements. You should refer to our SEC and OEC filings for a more detailed discussion of some of the factors that could affect our future results and occurrences.

That said, what we would like to accomplish on today's call is a financial and operational review of the quarter, a recap of what IMAX has been able to accomplish year to date, and in particular, since our last conference call. Finally, we would like to outline how we believe these events will translate into positive financial results in the fourth quarter of 2002, 2003 and beyond.

To begin, IMAX's third quarter was of one of significant achievements. One where our financial turnaround continued and where we made significant strides in implementing our DMR strategy. In fact, there are a number of places where there is tangible evidence that this strategy is working and that it'll continue to fuel momentum that we're seeing in signing new deals for IMAX theaters. Before Rich and I get into specifics I want to review the third quarter.

As many of you have probably seen from our release, we were pleased with the results for the third quarter, which reflected smaller than anticipated losses. In the most recent quarter, IMAX reported a loss from continuing operations of 13 cents versus a loss of $2.95 per share in the third quarter of 2001. On a net basis, we lost 7 cents per share versus losses of $4.48 per share in the prior period. Despite the loss for the third quarter we were still profitable for the first nine-month of the year with earnings from continuing operations of 3 cents versus losses from continuing operation of $3.69 per share for the first nine months of 2001.

However, as many of you who follow the company know, year to year comparisons are distorted as last year's third quarter and nine months results had several very large one time restructuring charges and write-downs. Based on our third quarter results and our outlook for the fourth quarter of 2002, we continue to believe that IMAX will be profitable for the fiscal year 2002. For the quarter, our revenues increased 1 percent over the prior period. Broken out IMAX systems revenues declined by about 30 percent as we recognize revenues on one theater system versus three in last year's third quarter.

As we've stated in the past the variability and timing of installation, which are tied to our customers construction schedule can vary from quarter to quarter creating a lumpiness to our systems revenue line. The absence of meaningful installations in the quarter was, however, reflected in our guidance, which projected a third quarter loss. In the quarter film revenues increased nearly 50 percent, primarily due to the strong performance of our newest film Space Station, which opened in early April and continues to play in over 80 theaters. To date, the film has grossed over $33 million, which is well above our initial expectation. Space Station had a significant effect on our film revenue line, and also contributed to the 17 percent increase in other revenues as our owned and operated theaters benefited from a strong performance, as well as the opening of Apollo 13, The IMAX Experience.

Gross margin for the quarter was 33.5 percent of revenues, which is significantly higher than last year's number as a number of the charges that we took last year were included above the line. SG&A declined significantly to $7 million versus $12.1 million, during the quarter as we continue to closely monitor expenses. R&D was approximately $900,000 during the third quarter versus $400,000 last year. Interest expense declined by approximately $1.4 million due to the retirement of $91 million of our 100 million convertible debts due in April 2003.

In terms of cash, we ended the quarter with a balance of $25.2 million or almost $1 per share. This does not include the 13.5 million in cash we will receive as part of the Regal settlement announced last week, which brings our projected year-end cash levels to approximately $35 million. This is a degree of liquidity that IMAX has not seen for quite some time. It is also important to note that since last March we have experienced a 35 percent reduction in debt, net of cash, to approximately $180 million and a very obvious strengthening of our balance sheet. Partially tied to our improved financial base and the stronger films slate, we have seen the marked -- we have seen a marked improvement in the level of signing for new IMAX theaters, a key driver of IMAX's future financial performance.

During the quarter, we signed deals for five theater systems with an aggregate value of $9.4 million. This compared to just two new deals worth 3.7 million in the third quarter of 2001. More impressively, for the first nine months of 2002, we have signed deals for 10 theater systems representing approximately 22.2 million versus just four systems worth 11.6 million in the same period, a year ago. These signings are set to become revenues and profits over the next several years.

Included in these signings are two theaters in Ecuador, which represent our first theaters in South America, another theater in China, one elsewhere in Asia and one deal in North America. Also during the quarter, we announced a theater signing in Russia and two theaters in Chile. Of the four theaters that we announced in South America, recently, we expect two of them to install in 2003 and the other two thereafter. This diverse geographic base of signings in just one quarter is clear evidence that IMAX continues to be a very powerful global brand. The tone of the fourth quarter for signings also remains positive.

One of the major forces driving the improvement and content for IMAX theaters is our proprietary and pattern-pending technology called IMAX DMR. For those of you who are new to IMAX, DMR technology allows live action-films like Ron Howard's Apollo 13 or the next installment of Harry Potter or The Matrix to be converted to IMAX's 15/70 format. In our view, as we convert more and more films to our format and drive ancillary box office profits for major studios and commercial cinemas, our network of IMAX systems will continue to grow which will lead to significant returns for our shareholders.

Over the last two weeks there were two key data points which we believe clearly demonstrate that our commercial strategy fueled by IMAX DMR taking hold. First, we announced last week a deal with Regal Entertainment Group, the largest commercial exhibitor in the world, to install five IMAX theaters into its multiplexes. The five theaters, which had previously been IMAX theaters but were closed by the former management teams of Edwards and United Artists as part of their bankruptcies, will all be reopened by Regal by mid 2003.

This brings the number of theaters that Regal has contracts to 11. And when you include one theater that Regal has the management contract for, this brings the total number of IMAX theater that Regal manages to 12 making it the largest third party operator of IMAX theaters in the world. Under the terms of the agreement, Regal will pay us $13.5 million in cash this year, which settles our outstanding claims in the Edwards' bankruptcy subject to bankruptcy court approval. We view this Regal agreement as a key event for IMAX that goes well beyond the fact that we will pick up five signings and one installation in the fourth quarter and four installations in 2003.

For Hollywood, this decision both immediately improves the economics of a DMR release but also shows that the largest North American theater chain has increased its commitment to our business. We expect our relationship with Regal to grow in the future. The second recent event that leads us to believe that we are on track with our business plans was the release of George Lucas's Star Wars Episode II - Attack of the Clones, the IMAX experience. The movie opened this weekend on 58 screens, and we are pleased to report that the results are strong by any measure generating 1.4 million in gross box office or an impressive almost $25,000 per screen, the highest per screen average for any film last weekend in North America. The release has also broken numerous IMAX box office records and we are pleased to report that both Lucas Films and Fox are happy with the initial outcome.

We're also particularly pleased that seven of the ten highest grossing locations are theaters that we operate ourselves. Going forward, we think that IMAX DMR will move towards more of a day-and-date strategy where an important Hollywood event film will be simultaneously released in 35 mm in IMAX theaters. The day-and-date strategy means the IMAX release will benefit from the tens of millions of dollars spent on marketing by the studio.

With that, let me turn it over to Rich, who will continue the discussion of IMAX DMR and take you through why it can have a dramatic impact on our business model.

Thanks, Brad. As Brad said earlier, we're seeing increased evidence that our strategy of turning IMAX theaters into a new released window for Hollywood films is becoming a reality and is in fact gaining momentum. As we are aware that there are a number of new investors on the call with us today, I'd like to spend a few minutes discussing the strategy in greater detail and reviewing how we expect this to affect our financial results in the future.

To begin, IMAX makes the majority of its profits from the upfront revenues recognized upon the installation of a new IMAX theater and from the recurring royalty and maintenance fees that we collect from existing theaters. Obviously, as the number of IMAX theaters grows so will these numbers. As with any business, we need to make the economics of operating an IMAX theater as attractive as possible for the theater owner by both helping theaters drive their top lines while working to cut operating costs. For IMAX, this means that we have to attract the films that we believe will increase attendance to IMAX theaters.

While we remain very committed to our historical customers segment in museums and science centers, we believe that the commercial market offers significantly more room for growth. Accordingly, we are working to bring the most commercially viable Hollywood films to IMAX theaters and create a new release window for Hollywood films, primarily simultaneous day-and-date releases. They are more it to the way in which the invention of the VCR fueled blockbusters growth or the growth of cable TV fueled HBO's success. We believe that our re-purposing technology IMAX DMR will do the same for IMAX.

Let me take a minute and give you the history of how DMR has evolved as part of our commercial strategy and how it's going to have a dramatic impact on our business going forward. On January 1st 2000, the Walt Disney Company launched Fantasia 2002 the IMAX experience, the first true Hollywood film ever released to IMAX Theater. The film, which grossed about $65 million in only 75 theaters in four months convinced us and convinced the studio that there was money to be made by releasing films to IMAX theaters. In fact, Disney was so impressed with these numbers that it decided to re-release Beauty and the Beast this year, which was also successful and has now indicated that it plans to release at least an additional six films over the next years.

These releases include a simultaneous release of Treasure Planet this month, a re-release of Lion King this Christmas, a prequel to the classic Black Stallion called The Young Black Stallion by next fall then re-releases for the next three Christmases of Tarzan, Aladdin and The Little Mermaid. This is the largest commitment of films by one entity ever to IMAX theater.

While the financial performance of Fantasia and Beauty were impressive, they were animated films, limited -- limiting their market to a small slate (ph) of animation releases for families and kids. We knew that in order to penetrate the commercial markets we had to bring live action blockbuster films to IMAX theaters, and in March, we introduced IMAX DMR.

The first film to undergo the DMR process was Imagine Entertainment's Apollo 13 directed by Ron Howard. Our main goal for Apollo was to demonstrate the Hollywood film markers, consumers and critics that the DMR process worked and can deliver a compelling entertainment experience. The film opened in 20 theaters in late September with strong weekend grosses averaging over $10,000 per theater and universally positive reviews. For example, a Web site called rottentomatoes.com that holds (ph) film reviews had 100 percent positive reviews for Apollo 13, the only perfect score for any film in Northern America at that time and the number two film was in the 70 percent range.

During the early part of Apollo's run, we commissioned a research study that found that 95 percent of the people who saw Apollo rated the film extremely highly and 92 percent said they would recommend it to others. Most interestingly, 48 percent said they would have paid a greater premium price to see it and other films in IMAX's 15/70 format. In fact 37 percent of those surveys indicated that they would pay a $3 premium, which mirrors the results from our earlier research, which we took during the run of Harry Potter last year. Finally, it was a lot of the initial work that we did on Apollo that led to George Lucas's decision to commit to a DMR release of Clones.

It is interesting to note the speed with which we converted and released Clones. We began working on this film in mid August and released it only 10 weeks later in 58 theaters. Being able to operate on such a short timetable will be critical as we move towards more of a simultaneous or day-and-date release strategy. We believe that the key to becoming a new release window for Hollywood films is to move to a day-and-date release strategy as these projects should deliver the most compelling economic and marketing benefits to studios and IMAX theaters.

A day-and-date release would not require a studio to commit significant incremental marketing dollars to the IMAX version while allowing the studio to charge a premium price for the IMAX experience. The studios find this particularly attractive as it should allow them to charge a premium price for their best content something they cannot use today.

Also, the gross on the IMAX version would be added to that as a 35 millimeter version and would be included in the pay TV and home video ancillary contracts, most of which are priced off the original gross box office receipts that have become so lucrative for the studios. On the marketing side, an IMAX release also helps to turn a movie release into an event that's part of what motivated Disney in releasing Treasure Planet this November. In essence, it identifies the film playing in the IMAX theater as "The Film" to see in a given multiplex. We're currently in discussions with the number of studios right now about doing our first day-and-date release of a live action film.

Given the results of Fantasia, Beauty, Apollo 13 and now Clones and the compelling reasons I just mentioned, we expect to have at least one day-and-date release in 2003. In fact Disney has already committed to simultaneous release in IMAX theaters on November 27th of its big animated Christmas film, Treasure Planet as I mentioned. However as Brad mentioned before, we believe that live action films will be the true application of the potential of IMAX theaters as a release window. For IMAX, we believe the impact of becoming a release window will be profound.

Historically, IMAX has always faced the challenge of producing enough commercial film content to satisfy the demand of our commercial theater operators. The creation of IMAX DMR allows us to take advantage of the billions of dollars that Hollywood spends every year making and marketing films to draw from their vast talent pool. IMAX DMRs should also start what we call the virtuous cycle where more and better films in IMAX theaters reach a higher attendance and stronger financial results. Improved economics for IMAX theaters would drive the growth in the IMAX network improving the returns for filmmakers, who'll make more films available for IMAX theaters thus beginning the whole cycle again.

For IMAX Corporation this should translate at the higher royalties at existing theaters followed by increased sales of new theaters followed by upfront payments and recurring royalties and maintenance streams on the new theaters all long minimizing film cap ex for commercial films.

We're already beginning to see the effects of this virtuous cycle on our business as we have seen a significant interest -- increase in the new level of theater signing and on the other side of the equation, increased interest from the Hollywood Studios. We believe that an enormous potential opportunity exists for IMAX. There are approximately 1,800 multiplexes and megaplexes in North America today. And including the Regal announcement there will be IMAX theaters in only 33 of those. This represents a penetration rate of just 1.8 percent. We believe that if IMAX could continue to further reduce capital on operating costs of IMAX theater installations we can end up in a significantly larger number of these multiplex locations. Remember that statistic is just for North America.

Our penetrations are -- rates are much lower elsewhere in the world. In terms of guidance for 2003, we're currently beginning our budgeting process and expect to provide detailed guidance in due course. For now what we can say is that 2003 will be profitable. As we hope we have demonstrated on today's call, we believe that there has been a significant change in our business over the last several quarters; in fact, the last several weeks. There is a lot of reason for optimism when you look at the upcoming film slate for IMAX theaters including six films from Disney, two in the next two months; James Cameron's next film after we released Titanic, which will be released this March or April; plus the potential of day-and-date releases of blockbuster Hollywood films.

Combine that with our lowest -- lower cost structure and healthier balance sheet, increased cash reserve, plus the recent evidence that we have that our commercial strategy is taking hold including the Regal agreement, the strong opening of Clones, five signings for this quarter, and a good outlook for signings in the fourth quarter and you understand our positive outlook. Our goal is now to translate all of this into strong financial results and most importantly, improve shareholder return.

With that, I'd like to open the call for questions -- operator.

Thank you. The question and answer session will be conducted electronically. If you would like to ask a question, press star followed by the number 1 on your telephone. We will proceed in the order that you signal us, and we'll take as many questions as time permits. Once again, that's star 1 if you would like to ask a question.

And we'll pause for just one moment.

And our first question comes from Kavir Dhar with Jeffries & Company.

Hi, thanks. Just have a few questions here. You guys mentioned the theater signings in the quarter. I just missed some. I just want to make sure I got it straight. The third quarter signings, it looks like you had two in South America, two in Asia, and one in North America. The two in South America, did you say they were part of the October 16th announcement ...

Yes.

... where you had four.

The two, you know, we accounted in the fourth quarter were the -- in the third quarter were the two deals in Ecuador.

Okay. And as far as the theaters in Asia, well, what countries are those two in?

One's in Singapore, and I believe one's in China.

China.

And as far as -- I think you mentioned the timings -- if you could just go over that again? What were the timings for the five signings in the quarter?

You mean installations?

Installations, right.

Probably anywhere from 12 to 18 months in general.

Okay. And so where does that leave your pack (inaudible) now at the end of the September quarter relative to June? I think, in June, you had 55 systems and 145 million in backlog roughly.

Right. We now have 57 systems and about 146 million in backlog.

I just want to add to that for the people that don't know, we don't include conditional deals in a backlog. Backlog represents signs, findings, commitments; although one of the things that we've discovered over the last 24 months is sometimes we have to pursue people in courts to, you know -- that have signed binding commitments.

Okay. And related to the backlog, I was just wondering, if you could give us a sense of the composition; if you can characterize you three customers as institutional, commercial and multiplexes; how does the 57 break down?

Well, I just said, of the total of 57; roughly, 30 are commercial multiplexes, very little of which are in North America; another 20 are commercial, which we would call standalones; and it's about seven that are institutional; so the total, 57.

Right. And any sense of what the installation schedule looks like in the fourth quarter and what you're seeing in terms of likely installations?

Look, (inaudible), we usually don't announce that in advance. But -- I mean, we expect in the range of 4 to 5 -- but I think, more relevantly, however, it turns out; and we expect the fourth quarter to be profitable and the year to be slightly profitable.

Okay. And the last question, I guess, I have is -- if you could just give us a sense also on -- if we look at adjusted EBITDA or recurring EBITDA, basically, operating income plus D&A less non-cash items, what's that for the quarter?

Sure. As -- actually for the nine months, I have a number of EBITDA of about 22 million and that would include depreciation, amortization plus about 3 million in miscellaneous write-down. So a total of 22, three of which are kind of one-timers.

Okay. Thanks.

You're welcome.

You'll now hear from Mike Gallant with CIBC World Markets.

Good morning. It looks like all the backlog questions have been answered. In terms of the number of installs that you'll do in '03 -- I know you can -- you know you're not going to give specific guidance, but is it safe to say that you'll do at least 20 installs in '03?

I think we don't really comment on that. I think our installs in, you know, '03 should be equivalent or greater than our installs in '02.

Okay. As far as -- can you talk a little bit more about the virtual cycle and as far as timing? I mean, clearly, you guys have peaked the interest of all the major studios. So I think that from the content side of the equation you're going to deliver more and more content day-and-date and all that and that's when the story -- that's the first half of the story. The second half would be getting the theater chains excited based on shown on the, you know, the better returns that an IMAX theater can deliver.

Can you talk a little bit about the timing of when, you think, you'll be able to -- really be able to kind of go out and market that to the theater chain operators which are coming out of the bankruptcy and probably doing new builds in '03 and '04?

Well, I think, if you would ask us that question a year ago, when we outlined the strategy, we would have said that the key thing in getting the exhibitors interested again would not be the announcement of DMR projects but would be actually demonstrating number. And I think we are in a mode right now with the Star Wars numbers, which, you know, by any measure, are impressive, you know, off the charts. This is really the first time that we can go out and, you know, the studios can -- the exhibitors can see proof of concept. So I think now is the time that you start to market it.

And frankly I think, you know, part of what went into Regal's thinking was the DMR strategy. And there's no question that our increased signings activity in the world, that's a factor in the resurgence. In terms of, specifically, the North American exhibitors, I think, our sales team will go out now with this data. As we said in the presentation, we -- you know, we still have Treasure Planet and Lion King coming this year, which, I think, will demonstrate some positive numbers as well; and I think the marketing team will show those around.

We're seeing renewed signs of interest. I would say that will probably translate into more, you know, real signings by the North American exhibitors, probably, second half 2003, 2004. But, again, it's happening already in the third quarter. So it's more of a gradual build-up than a shelf kind of thing.

And one thing I would like to add to that is another catalysts are getting the multiplex operators back in the game. Two other things that we've been doing here over the last year and a half, I mean, one having to do with the operations of these theaters -- I mean, we could effectively lower their print costs rather substantially (ph), which obviously makes them more profitable in returns -- helps them boost their return on investments.

And also we're in the later stages of -- really the final stages of a product development which will increase the efficiency, something we call the low cost theater, because again as we bring down the costs proceeds for a multiplex operator that in turn drives their returns. And, you know, we are really inches away from, you know, introducing that to the multiplex operator but we're trying to push it on all different -- in all different places.

Okay. That was a great answer. As far as -- is there any -- you further along in your plans be able to kind of format an existing theater to IMAX or is that something that still a work in progress?

I think that something that we're looking at. It's not a strategy that we've decided to undertake. It'll be one of the things when we look at to the future whether there are better, you know, other cost efficient and profitable ways, profitable products we can put out in the market that will meet the needs of the studios and exhibitors. So I think it's -- suffice to say it's under investigation, but it's not a strategy that we're implementing at the moment.

Okay. Perfect. Thank you.

Winston Server (ph) with Dresdner has our next question.

Hi. Good morning. Just quickly, and I have a couple of follow-ups. What was cap ex in the quarter?

Cap ex was about 600,000.

Okay. I saw Star Wars over the weekend. It was phenomenal and, you know, hopefully other movies will be just as good or better. One question that I had was we noticed that certain scenes were cut and I was sort of wondering why that happened and is there an issue with sort of the running time of these movies. There's a certain maximum amount of minutes that an IMAX movie, you know, that the DMR can handle?

The answer is yes. And there is an issue, which easily remedies and in fact for a number of the theaters that actually showed Star Wars had a length of actually two hours, there was some cutting. But we had to actually upgrade the platters and the steel arms that hold the platters in a number of theaters just to upgrade them to two hours. If we thought that we identified a lot of demands for movies that, you know, two hours and twenty minutes or two hours and thirty minutes we could upgrade the platters once again. But, yes there is an impediment but it's not that significant.

Okay. Is that factoring into sort of -- for the short term, I guess, for next year which movies you're going to be looking at to have your day-and-date releases?

Well, that factors in two ways. One, at first cut the answer is no, it doesn't. I mean, Apollo 13 was a film that was over two hours, as was Attack of the Clones. And Ron Howard on the one hand and the Lucas organization on the other felt comfortable turning that into two hour films for release in IMAX. So it really isn't a factor is, I guess, the short answer.

But if a studio is releasing the moving across the country and they're releasing it in IMAX, aren't they going to want to show the same thing or they're ...

Absolutely, on a day-and-date release, yes, that is the factor.

Yes. Although -- see one of the other things we've been considering is the price point. Now, remember, if you could charge $3 more for IMAX films, let's say day-and-date in IMAX version, you'd rather have a shorter film if you're doing it, because obviously you're charging the same price whether the film is two hours or three hours. So I think that's just as much a motivating factor as the technical issues, and -- you know, there are good reasons to do a two hour film rather than a three hour film. But if the right one came along and it was three hours, we'd consider it.

I am not trying to blow this out of proportion, but you guys think that if you want to do a two hour and fifteen minute movie, you have the ability to upgrade.

Yes. We'll figure it out.

Okay. Two other quick questions. Guidance, Rich, I think the -- in the beginning of the year when -- I recall we had -- you gave revenue guidance for the year of 120 to 140. Is that still the range?

Yes.

Can you give us any sort of -- I mean, obviously that was the -- almost a year ago. Now, we're sort of towards the end of the year. Can you give a sense of whether its going to be towards the higher end or lower end?

I think we'll be somewhere in the middle.

Okay. And then, going back a year and a year -and-half ago there was a lot of talk about digital, digital cinema and converting IMAX theaters to digital to reduce the print cost for the operators. Is that still something you want to do, or that's really on the back burner right now?

I'd say that's something that's at least five years away, and there're several reasons for that. First of all, the whole digital revolution in the 35 millimeter business really slowed down for a variety of reasons including the inability to come to an agreement on standards, the financial difficulties that both the exhibitors and the studios had, and just the thing never grabbed hold. There were a lot of models talked about, and it just never took hold. I think that's one major reason.

The second one is that there seems to be some real hurdle in creating the quality of the IMAX experience using digital. And we've made a fair amount of progress in -- as I said, I think in five years or so we'll start to migrate that way, but it just doesn't seem to make sense right now to spend the R&D that you would need to get in that position.

Okay. And now you have a strategy where you can boost the theaters revenue as opposed to just worrying about their costs.

Yes. And remember, the cost of prints came down about 35 percent in that same period of time. So it changed the economics a little bit.

Okay. All right. Great. Thanks a lot.

And as a final reminder, if you would like to ask a question, press star 1 at this time.

And moving on, we'll hear from Keith Stevenson (ph) with Jeffries.

Hi, Brad and Rich. How are you guys? Can you hear me?

Yes.

Yes.

Great. Just a couple of questions, and I don't want to flog a dead horse here. But just going back to the fourth quarter quickly, the films that you had -- that came out that sort of drove, you know, the year-to-date numbers, in particular, the third quarter numbers with Space Station primarily and then Apollo 13 partially. Could you just talk a little bit about what you think -- and just on a quarter-over-quarter basis, now going over into the fourth quarter, as we're going to see some increases in the film releases?

Well ...

What you think the film revenue might -- I'm expecting that we're going to see, obviously, some sort of an increase quarter-over-quarter there on the film side?

I think we're going to have -- I think the IMAX network -- and that's again different from IMAX Corporation -- is going to have a very strong quarter. In films, when, you know, you look at Star Wars, Treasure Planet, Lion King; Santa and the Snowman, which is a film we haven't mentioned in this call, which is a marvelous 3D, you know, 45-minute film, which plays to really family audiences. But I think it'll be hard for us to tell you exactly, you know, how we think the revenues and our contribution in our company is going to compare in fourth quarter versus third quarter.

Right. Okay. And then you -- and then, I think, you said -- someone else was asking about the deliveries that you would might be able to give guidance on the quarter; and I think the number mentioned was at -- I know, last year, you did six. So we're talking maybe five but in any way a similar and a comparable number.

Yes, I ...

Would that be the cost to qualify that?

I think we said we'll do four or five.

Okay. And then, just lastly, with the first day-and-date film coming out with Treasure Planet this month, could you talk a little bit more -- since that's a big part of your strategy going forward -- just some metrics in terms of how you are going to be looking at that film; and how you would quantify whether its degree of success, let's say, as a day-and-date release. So what are the metrics you're going to be looking out there when that film comes out?

Keith, we have not really looked at that as a test of day-and-date release. Disney determined to do that of its own (inaudible), and we're not really involved in the distribution pattern. And, in fact, we did not looked at film at our owned and operated theaters. And in fact, as Brad mentioned in his opening remarks, if you look at Star Wars -- the top ten films for Star Wars, 10 ten of them are (inaudible) 7 of the 10 and something like 9 of 14 are operated by our owned and operated network. So we've not --and, you know, we don't have access to their data, frankly; it's proprietary data.

So it's going to be very hard to benchmark. With that said, I think -- and I don't -- I'm not aware and I don't think Disney is trying to up-charge for the IMAX version, which is our whole day-and-date release plan. With that said, I -- you know, Brad, I think, Treasure Planet is going to do very well. It's a -- you know it has some decent buzz in advance. It looks spectacular. If you've seen the trailers on the IMAX screen it's going to have the Disney brand behind it with the IMAX brand and the Disney marketing budget, but I don't remember the number. I think it's only playing at 20 or 25 IMAX screens.

So I think the results -- I don't even know that they're going to pull out the results. They are not really going to be this positive but I think it will do well.

All right. So I guess what you are saying now we're really going to be looking towards the first live action release than in '03 to sort of gauge some sort of sense of what you think might happen with your own day-and-date strategy?

Absolutely, because as delighted as Rich and I about Disney's participation in the business with Lion King, Aladdin, Tarzan and Fantasia, we don't -- we at IMAX didn't want to build a business simply around animated film. We thought we have to go broader to more mainstream event films like, you know, Harry Potter, Lord of the Rings, Cat in the Hat. That's where we should build our business around. And, you know, that won't be tested until '03.

Great. Okay. Thanks a lot.

And we have a follow up from Winston Server with Dresdner.

Hi. I forgot to ask, Frank what was EBITDA on the quarter? I know you gave the nine month number.

EBITDA on the quarter was a little over 4 million.

Okay. Great. Thanks a lot.

We will now hear from Michael Proddy (ph) with Rainer Capital (ph).

Yes, hi. I'm -- most of my questions have been answered. Could you just update us on the Wasserstein partnership holdings and how you expect that situation to be resolved?

Sure. Wasserstein & Company owns about 10 million shares in a limited partnership for which it is the general partner. When Dresdner -- the Dresdners -- when Wasserstein Perella was sold to Dresdner. That partnership was kept under a separate company, which I believe is controlled by Bruce Wasserstein. They hold those shares in a partnership. The firm holds 2 million of the -- permanent employees hold 2 million of the shares and the other 8 million are for the account of the limited partners. I believe that either two or three years ago, the fund expired and for each of those periods of time Wasserstein has gotten an extension of an additional year.

Where it stands now they got another extension, I believe, this August. So, you know, they have until next August to figure out, you know, what their options are, and their options would include, you know, sale of the block as a whole distributions of a limited sale as part of the block, et cetera. I -- you know, I think they are believers in the company, and I think that's one reason they stopped the expansion.

Okay. And presumably, I mean, they're smart guys and presumably they would do it secondary rather than just a straight distribution, right? I mean that wouldn't really make any sense?

You know, really it is really controlled more or less by Bruce Wasserstein and he makes his own decisions.

Yes, okay, fair enough. Thanks.

And it appears there are no further questions at this time. Gentlemen, I'll turn the conference back over to you for any additional closing remarks.

Thank you very much, operator. I guess I would just like to reemphasize Richard's conclusion, which is not, you know, not withstanding I think some of the small financial losses this quarter, we are very pleased about the direction of the whole company to broad (ph) strategic direction and some of the very specific things that have occurred in the last quarter including an acceleration of signing the settlement with Regal, obviously the release of Star Wars. Our relationship with the studio continue to go very, very well as we look into '03 and look for other films.

And, you know, it's been a very hard last 18 to 24 months for us at IMAX but we think we're at the tail end. We've come out our turnaround and we're now in the mode of trying to turn this back into a very healthy growth company were we think it belongs to be. So with that thank you all for joining us and we look forward to the next call. Thank you.

And that concludes today's conference. Thank you for your participation.