Imax Corp (IMAX) 2008 Q1 法說會逐字稿

Welcome to the IMAX Corporation's Q1 '08 earnings conference call. Today's call is being recorded.

At this time I would like to turn the conference over to Brad Wechsler for opening remarks and introductions. Mr Wechsler, please go ahead.

Thank you very much, operator. Good morning, everyone, and thank you for joining us today on today's first quarter conference call. Joining me is my partner, Co-Chairman and Co-CEO, Rich Gelfond. Also with us are our CFO, Joe Sparacio, and General Counsel, Rob Lister. Before we begin, let me remind you of the following information regarding forward-looking statements. Our comments and answers to your questions on this call may include forward statements that are forward-looking in that they pertain to future results or occurences. Actual future results or occurences may differ materially from these forward-looking statements. Please refer to our SEC filings for a more detailed discussion of some of the factors that could effect our future results and occurences.

During today's call references will be made to certain non-GAAP financial measures as defined by REG G of the Securities and Exchange Commission. Discussion of management's use of these measures and reconciliation to the GAAP measures are contained in the Company's earnings release and our 10Q, which will be filed later today. The full text of the earnings release, along with supporting financial tables is available on our website, imax.com. Today's conference call is being webcast in its entirety on our website. We are pleased to have the opportunity to speak with you today to give you an update on IMAX's business and our progress with respect to our stated growth objectives. Our transition from a film to a digital platform is on track and we are close to the launch of our digital product and consequently, on the verge of beginning what we view as a gain changing digital transformation.

As many of you know, we have characterized most of 2008 as a transitional year from a financial perspective, as we continue implementing our key joint venture in digital initiatives and our first quarter financial results indeed reflect this. That said, we are very encouraged about our accomplishments in building the elements of future financial success and believe that the Company is well positioned to benefit both financially and operationally from the steps we are presently taking. To that end, we were especially pleased to announce last week that we have entered into two financing transactions that significantly bolster our financial position. We will discuss each of those in more detail in later in the call. But to summarize, we expect to ultimately have access to approximately $55 million to $60 million in cash on hand and available borrowings under our credit facility.

To understand why we felt it was prudent to complete these financings, I would like to put our current growth prospects in perspective. From 2002 to 2006 we had a total of 150 signings or about 35 signings a year. In the last two quarters alone we have had 173 signings. Our 66 signings in the first quarter of this year make 2008 already the second best full year for signings in our 40 year history surpassed by 2007 when we signed the hundred system AMC joint venture. We believe that the implementation of our digital joint venture agreements will dramatically transform IMAX and last week's financing transactions effectively provide us with the financial strength not only to complete the roll out of our 100 theater JV deal with AMC and our 31 system JV deal with Regal, but to pursue other joint venture opportunities in the future as well.

The additional capital and increased availability make us comfortable that we can execute this important digital rollout. Today I will begin by reviewing our overall progress since our last call two months ago. Then I will briefly recap our quarterly results. I will then turn it over to Rich to take you through our view of the future as we look ahead to the anticipated improved financial performance in the fourth quarter of 2008 and profitability in 2009. First, let's review where we stand with our digital projection system. We are in the final stages of productizing our digital prototype, which has been operating near our corporate headquarters in Ontario, Canada since last June. We expect to ship our first three digital systems to AMC theaters in the Washington DC area by the end of June.

Following a period of operational training and technical fine tuning, we expect the AMC Hoffman IMAX theater, AMC Potomac Mills IMAX theater, and AMC Columbia IMAX theater in Baltimore to be fully operational by mid-July. These are scheduled to be followed in August by three additional theaters debuting the new IMAX digital system in the Philadelphia market. For added perspective on our rollout, we expect approximately 20 digital installs in the third quarter and up to 30 digital installs in the fourth quarter. As we have detailed previously we expect digital to help facilitate a more rapid buildout of the IMAX network by removing the vast majority of print costs from the system. In addition, because of the print savings the transition to digital will enable us to show even more Hollywood films, up to ten or more a year compared to six or seven now, and also enable theaters to enhance programming flexibility, including the ability to show live action events.

Digital also lowers installation costs for exhibitors when retrofitting an auditorium to an IMAX theater by about $100,000. We believe DreamWorks Animation's decision to release Madagascar 2 in IMAX for a two-week run prior to Harry Potter and The Half Blood Prince represents an early validation of our digital strategy. Importantly, it shows that the virtual elimination of film prints enables us to release titles is a shorter time period. Even though most of the theaters showing the film will still -- showing the movie will still be film, we expect roughly 35 digital systems to be installed in time for the Madagascar 2 run. The existance of these digital theaters greatly lowers the average print cost, thus enabling both DreamWorks and IMAX a quicker path to recoupment.

We are encouraged that the introduction of digital is already helping to drive additional content into our network and believe that ultimately this will translate into increased revenue for exhibitors and the accelerated growth of the IMAX network worldwide. The ability to release more films will help drive the returns in our sales and joint venture models. Bear in mind that studios will enjoy a higher return on each picture with minimal print costs, which provides an incentive for studios to release even more of their blockbuster films in IMAX. Turning now to our first quarter financial results. As indicated in this morning's press release, we recorded a net loss from continuing operations after taxes of $10.3 million or $0.25 per share on a diluted basis, compared to a net loss after taxes of $4.6 million or $0.11 per share in the year ago period.

As expected our financial performance reflects in large part the impact of our initiatives during the current transitional period. There are three things that particularly impacted our results. One, a decrease in film revenues in the first quarter of '08 compared to Q1 '07, which I will discuss momentarily. Two, a $2.1 million increase in SG&A, including higher professional fees largely related to ongoing regulatory matters and related issues and higher staff costs as well. Three, $1 million increase in R&D compared to a year ago, which is related to our digital launch, most of which is simply accelerated spending of dollars that were otherwise originally earmarked for later in 2008. Although the quarter's bottom-line was weak, as expected, we want to emphasize that we believe our progress, and indeed the foundation we are building for the future, is best measured by the steps we are taking to generate and support future growth.

This is most clearly evidenced by the fact that we signed 66 deals in Q1 of this year, including the 35 theater lease deal with RACIMEC, as well as our 31 theater joint venture deal with Regal Cinemas compared to 13 in the first quarter of last year. We are encouraged by the interest that we are seeing in IMAX and believe it bodes well for us through the remainder of the year and beyond. Looking at a few key line items, total revenues for the first quarter came in at $23.5 million compared to $26.8 million last year. Systems revenue was $12.5 million in Q1 compared to 13.1 last year, $13.1million. We recognize sales and sales type lease revenues on four installations in the quarter compared to five in the first quarter of last year. There was one additional installation for which we did not recognize any revenue because we will provide a digital upgrade.

As we have stated before, while we work to develop and launch our digital product, signings and therefore installations slowed as exhibitors withheld their demand pending the introduction of our new digital product. Now the ability to see our digital system continues to spur signings and indeed our level of business activity in general remains very high. Our backlog at the end of the first quarter consisted of 245 systems with a value of $157 million, including 135 joint venture arrangements which carry no backlog value. This compares with 83 total systems with a value of $128.4 million at the end of the first quarter of fiscal 2007 including three joint venture arrangements. Our first quarter film revenue was $7.4 million compared to $9.1 million in the first quarter of 2007. As I mentioned, this decrease was one of the key factors impacting our financial performance this quarter.

Film production and IMAX DMR revenues decreased to $2.9 million in the first quarter from $4.6 million a year ago. While we note that the first quarter is historically a weak quarter, we would also point out that this decrease can be attributed in part to the highly successful DMR release of 300 in the first quarter of 2007. The comparison relative to the first quarter of this year is particularly difficult given as Spiderwick Chronicles did not perform as well as we had hoped, grossing $6.8 million in IMAX in the first quarter. As we indicated on our last call, while we found the story to be very appealing, the film simply did not have the legs that would have enabled it to generate better results over its run. Turning to the balance sheet, we ended the quarter with $18.1 million in cash, which was up from the $16.9 million in cash that we ended the year with.

Speaking of liquidity, as noted earlier we recently announced that we have entered into two significant financing transactions. One with Wachovia to increase availability and term under our existing facility and one with the Douglas family, IMAX's largest shareholder, for the sale of approximately 2.7 million common shares in a private placement at a purchase price of $18 million. Rich will take you through these transactions and what they mean for the business in a moment. We are very pleased to have enhanced the Company's financial strength and believe we have adequate capital available to execute our strategies going forward. With that, I would like to turn it over to Rich.

Thanks, Brad. I would like to begin by taking you through our financial position in a bit more detail and then I will review our film slate and business outlook for the remainder of 2008. The two financing transactions we entered into last week leave us well positioned to execute our joint venture initiatives, as well as our highly anticipated digital projection rollout that begins this summer. On May 5th we entered into an amendment to our credit facility, whereby the minimum cash and excess availability requirement was reduced from $15 million to $7.5 million. Under the terms of this amendment, the Company is no longer subject to an EBITDA maintenance requirement so long as we are in compliance with the minimum balance requirement. The amendment also provided for changes which should increase our borrowing base calculation.

Over time we believe we will be able to drawdown close to the full $30 million permitted by our senior notes. The amendment also provides for an extension of the credit facility through October 31, 2010, which essentially extends the term by a year. On May 8th we completed a private placement of common stock with the Douglas family, IMAX's largest shareholder, for the purchase of approximately 2.7 million shares. The Douglas family, which owns 19.9% of IMAX's common shares post transaction, has signed a five-year stand-still agreement, whereby it has agreed to refrain from certain activities, such as increasing its ownership position in IMAX or participating in a significant Company transaction without IMAX's consent. We believe that these successful financings, which were completed on favorable terms, are an affirmation of our business prospects by our existing lender and largest shareholder and provide us with the financial resources that will enable us to execute not only our AMC and Regal deals, but the deals we hope to sign under our business plan.

Importantly, we believe that given the current high level of interest in JV's and activity levels in the business in general, it was important to strengthen our financial position so that we can pursue more joint venture agreements. With this capital now in place we have greater flexibility to implement our plans and drive our operating and financial performance in the years ahead. Turning now to our film performance. On May 9th we released Speed Racer in partnership with Warner Bros. Pictures. This family adventure from the Wachowski Brothers and producer Joel Silver, the creators of The Matrix' trilogy, grossed approximately $1.9 million domestically this past weekend on 84 IMAX screens were $23,000 per screen. While overall box office results were disappointing, we believe that they show that IMAX continues to be an important distribution platform that contributes positively to box office results.

In the case of Speed Racer, although the film's gross was lower than expected, we should underscore that IMAX accounted for approximately 10% of the overall domestic box office on a little more than 1% of the North American screens. This reinforces to exhibitors and studios that audiences continue to seek out the IMAX experience in disproportionate numbers when compared to regular 35 millimeter. We are looking forward to the Japanese premiere of Speed Racer on June 29th at the Tokyo Dome in Japan, a traditional venue for concerts and sporting events which holds more than 30,000 people. We partnered with Warner Bros. to install an IMAX projector and one of the largest screens in movie going history specifically for the night of the gala that celebrates the film's origins in Japan where Speed Racer was first launched as a pioneering anime-series.

We believe this major event will be a great reintroduction of the IMAX brand in Japan, where Speed Racer originated and where we hope to build a presence with exhibitors. Prior to Speed Racer we released the Rolling Stones concert film, Shine A Light, which was directed by Academy Award winning director Martin Scorsese and has grossed $3.9 million to date in IMAX. We found that this film, while critically acclaimed, attracted a niche audience that didn't ultimately deliver the numbers that are generated by releases with a broader demographic appeal. On the other hand we expect the film to play for a long time in the IMAX network and continue to generate revenues. We have now been through three of the eight films that should make up our 2008 slate. While we might have hoped for better performance on the film side to date, we believe that the five remaining titles will make '08 a solid year for IMAX's gross box office. Historically we have only had five to six films per year, so we believe the additional films this year should help mitigate the weak early results.

As part of our now five picture deal with DreamWorks Animation, we are looking forward to releasing Kung Fu Panda in June. This film has been heavily marketed leading up to its release and we are encouraged by the positive early feedback it has received. We remain very enthusiastic about the release of Dark Knight on July 19th, which is the next installment of Warner Bros. Pictures' Batman franchise. Director Chris Nolan will use 30 to 35 minutes of the film shot using IMAX cameras and we think this visual treat, available only in IMAX, will prove to be a unique draw for audiences seeking the thrill that the IMAX experience provides. IMAX will be significantly featured in Warner Bros. marketing efforts and we think this bodes well for us, as the film looks to be one of the summer's big hits.

We believe Dark Knight will be followed by another film in September/October, which we are trying to finalize in the next several weeks. After that DreamWorks Animation's Madagascar 2 will open on November 7th. This deal completes IMAX's integration into DreamWorks Animation's release strategy for all five of the studio's scheduled movies from 2008 through May, 2010. These include Monsters vs. Aliens 3D in March 2009, How to Train Your Dragon 3D in March 2010, and Shrek Goes Fourth 3D in May 2010. We are confident that the audience that embraced Madagascar will seek out the highly anticipated sequel and are pleased to be able to offer it during this two week period. We expect approximately 35 digital theaters will be up and running in time to exhibit this film. As Brad discussed, IMAX digital has virtually eliminated a significant barrier to entry into the IMAX business for studios and it is already driving additional content into our network.

Madagascar will be followed by the release of Warner Bros. Harry Potter and The Half Blood Prince on November 21st. We expect that, as with the previous Harry Potter installment, certain sections of the film will be presented in IMAX 3D. The last Harry Potter grossed $38.4 million on 142 IMAX screens or approximately $270,000 per screen and we expect this November's Harry Potter release to be significantly wider because of our digital rollout. For the 2009 slate, in addition to Monsters and Aliens, we are currently in discussions regarding 16 projects with a total of five studios. We are confident that you would share our enthusiasm for these prospects and look forward to keeping you appraised as we continue to fill out our future slate. Now I would like to turn to what all this means to IMAX from a financial perspective.

As we told you on our last call, much of the first three quarters of 2008 will be negatively impacted in part by our digital transition, including increased R&D, installations being delayed by clients wanting to obtain a digital system rather than a film system, and to a lesser extent our inability under the accounting rules to recognize revenue on systems where we will provide a digital upgrade. We expect that the rollout of our digital systems in the back half of 2008 will lay the foundation for improved financial performance, which should begin to manifest itself in the fourth quarter of 2008. We continue to expect 2009 to be profitable. In 2008 we expect to install approximately 38 joint ventures and recognize revenue on 15 sales or sales type leases from our current backlog. Additionally, we anticipate approximately 11 sign and installs, including six JV theaters, which are systems that install in the same calendar year they are signed and thus are not in backlog at the start of the year.

As usual we should caution you that projected installations are always subject to slippage for reasons generally outside of our control. Before we open it up to questions, I would just like to reiterate how pleased we are to be on the verge of launching our digital rollout. The efforts and capital surrounding this initiative have negatively impacted our financial performance in the immediate term, but we remain confident that the end result will be truly transformational to our business. In addition our joint venture initiative continues to be positively received by exhibitors and we are optimistic about the long-term benefits this new business model will bring to IMAX. Our recently announced financings should leave us well positioned to execute both our digital and JV initiatives as well as pursue future opportunities that may arise.

Finally, we think our film slate for the remainder of 2008 and beyond is filling out nicely, with a number of strong films that will truly deliver the IMAX experience to movie goers. We look forward to reporting to you our progress as we work to deliver enhanced value for our shareholders. With that we would like to thank you for listening and take your questions.

(OPERATOR INSTRUCTIONS) Your first question comes from Richard Ingrassia, Roth Capital Partners, please go ahead.

Thanks, good morning, everybody. You had said, if I had this right, up to 20 JV installs in Q3 and up to 30 in Q4. If that's the high end of the range can you give us a low end number where you have something close to 100% confidence and also comment if -- I guess on slippage or movement in the rollout schedule in general, if there are any, if there is any compensation or contingency in place for that?

On your first question, Rich, the number we gave you is what is scheduled to be rolled out. And at the moment we are going through drawings, we are interfacing with AMC and Regal. We have what I would call a very detailed play book, which goes through on a location by location basis when the theater is supposed to close, when it is suppose to open, what the plans look like, what the work required is and a very, very extremely specific plan. That's where the number comes from that we gave you, the 50 theaters. As we have consistently said, until you are out there in the field and that's why we are staging the rollout with three going, opening in early July and three again in August because you need real world experience. The problem is you don't know what you don't know. So I think what we are the most comfortable saying is that we have the 50 scheduled to go and then based on the real world experience we will see how that flips or not. Brad, do you want to answer the second part of the question? What was the second part, Rich?

If there are potential changes in the JV rollout schedule in general is there any compensation payable either to you or from you as a result?

No.

Our agreements weren't designed that way.

And then lastly, you had previously said, I know, that an equity raise wasn't likely or wasn't desirable at current levels. I take it the pipe to Douglas was maybe something they brought to you. If not, can you just give us your thinking there on that placement ?

I don't think we said it wasn't desirable. Rich, as we said on the call, the problem was we couldn't anticipate how many future JV's we would have and the level of interest certainly was stronger than we thought. As you know, who thought we would have over 170 signings in two quarters and our demand continues strong right now as we speak. So where we were before we had the Wachovia line, which expired in October of 2009 and was subject to EBITDA covenants, and we had this great demand going on for additional incremental JV's, so I think both Brad and I and our board felt very strongly a, to sleep at night and not be subject to any covenants and b, to be able to finance all of your existing business, it was extremely prudent to bring more capital in the Company.

Now as for the price, it was at market price and I think in this market selling 5% of your stock at market price is quite a good accomplishment. We are two of the largest shareholders, Brad and I, and I think taking 5% dilution versus if you could have gotten $0.50 more or $1.00 more, it would have been 4.2% dilution. Given the rates of return on these JVs, which as you know model out somewhere between 40% and 60% whether you include film or not, was a very, very prudent thing to do. We are extremely pleased with where we ended up.

Rich, I would say even beyond prudent, Rich and I wear different hats, as Rich said. Not only as the Co-CEOs on the Company on the one hand, but also as large shareholders, we think that this is just an excellent trade for every constituency in IMAX. And we are very, as Rich said, very, very pleased by it.

Okay, thanks, guys.

Your next question comes from Eric Wold of Merriman Curhan Ford, please go ahead.

Hi, good morning, guys, and I apologize if you might have addressed this, I got out off for a little bit of the call, but one on R&D spending, can you quantify maybe how much is left to be spent this year and kind of how that will flow? Is next year you expect almost all of it in the first half of the year, minimal in the back half? And then two, once you get past '08 what is more of a normalized R&D spend kind of starting in '09 and beyond.

I am going to give you approximate numbers that the whole year, I think, we were probably in the $5.5 million to $6 million range, the timing of which, as we moved up the launch date of the digital systems, as things continue to go well I think we have actually accelerated the timing of the R&D. I don't actually know the number that we are spending in the second quarter, but all in all those numbers are consistent and a little lower than the numbers that we have outlined in the past in terms of what the aggregate R&D spend should be.

Okay and then starting in '09?

I can tell you what our R&D used to run in a film world, which was around $3.5 million to $4 million a year. I don't think -- I can't tell you what it is going to be in a digital world entirely because there are lots of things that we want to do with our digital system. At some point live -- we are going to be able to show live action through our system but we would like to up res it in real time. So sort of realtime DMR. That will be R&D. There are interesting things we can do with frame rates in a digital world that are harder to do in a film world. That will be R&D. That notwithstanding, obviously R&D goes down but ' 09, really the first year that this project, the digital systems are out in the field probably be a little higher than normal. If I were to venture a guess, and this is totally a guess, I would pick an ' 09 number of around $5 million.

Okay, perfect. That's fair. And then second question, last, question, I don't want to play down the RACIMEC and the Regal signs in Q1, having those two be the only signings that happened in the quarter, granted big signings, maybe talk us through kind of what the other operators that are still sitting on the sidelines waiting to see digital, what exactly they want to see now that is holding them back in Q1 that may not have held them back last year. And then two, maybe quantify, if you can, maybe a range or whatever, kind of the number of theaters that may kind of be in discussion at this point.

Eric, first in terms of the other operators, you have to remember that the country is divided, North America anyway is divided into zones and at the conclusion of the Regal and AMC deals and other things and our backlog, we are in 250 of 400 North American zones. So what is holding back the exhibitors is that -- I have said this before and I hope this isn't a shock to anybody, but there are no more 100 theater deals in North America because we just aren't the zone. Nobody has that footprint. We are engaged now in North America primarily in a buildout, which as you know, is going to generate significant cash flow going forward and then we are in a fill-in exercise, which is find the open zones and find regional operators and some national operators that fit into those zones. Now, there are certainly some joint venture and lease deals going on in North America. But given just the zones that are available, there just aren't enough places to go to do large North American deals.

On the other hand, internationally where we are only in something like 150 or 200 of about 700 zones, there is a lot of market to go and we are in extensive negotiations internationally with JV's, as well as lease deals. And as we've said before, we are going to do JV deals in kind of GA kind of economies, where there is transparency of reporting and you are comfortable with the legal system. And then in other places like China, Russia, India we will fill it in with lease deal. If you ask me to quantify the number of deals we are in discussions about it is probably north of 50, Eric. As always happens with these things, will they all happen in the second quarter, absolutely not, And will some deals that we are not talking about now happen in the second quarter, yes. So it's a different world. You are going back to a period when we signed 35 theaters a year and comparing it and we have just a very different strategy now. We are out there much more with an elephant hunting gun rather than a bow and arrow. I don't think you should take anything from the fact that we didn't sign a lot of one off theaters in the first quarter.

No, not at all. Just wanted to get a sense. One quick follow-up to what you said. On international JV's in those countries, what would be a minimal number of theaters you would want to see in a JV. Would you do a JV on one theater or has to be kind of five or more.

We wouldn't do it on one almost in any circumstances, Eric. I think you will see in the coming months, if things come to fruition. There are a number of twosies and threesies we did, because that is a way to get people's feet wet in a market. If you are a member of the AMC 100 theater deal, started with a five theater deal. Depending on the country and depending on the nature of the partner and some of our discussions are with the largest exhibitors in different territories, I think we are open to doing a two or three theater deal, just so they can see the results and hopefully follow in the footsteps of AMC. I think in other cases you will see somewhat larger ones.

Perfect. Thank you, guys.

(OPERATOR INSTRUCTIONS) Your next question comes from Bob Friend, Plainfield Asset Management. Please go ahead.

Brad, can you help me understand what non-cash charges or onetime charges went through the income statement in Q1?

Actually, Joe is here with us as well as. Joe Sparacio our CFO. I will have Joe take you through some of those.

Bob, the big items that are going to run through the cash flow is non-cash for the quarter, depreciation and amortization of $4.2 million and stock in non-cash comp of $1.3 million and you will see that in the cash flow statement once it is filed. Those are the two big items.

And onetime charges, ongoing legal, that sort of thing?

In -- well, that's hard to gauge because we have -- they are ongoing.

They are not regular but they are ongoing at the moment of our SG&A what was it $1million?

Yes, we had about an increase of about $600,000 year-over-year, a large portion of that was the continued regulatory worries.

The legal and professional fees in the quarter were $3.1 million, Bob, compared to $2.4 million a year ago.

Hardly a normalized amount.

Thank you. There are no further questions at this time. I would like to turn the conference back to the speakers for final remarks.

I think that probably Rich and I will wrap up briefly. ' 08 is basically playing out roughly as planned. I think our financial results are maybe a little worse than we expected but we didn't expect '08 to be a positive year. '08 was expected to be a negative year as we transitioned to digital. On the other hand, in terms of the strategic initiatives I would have to say it is trending more positively then we had projected. When we put together our five year plan and looked into '08, I didn't think if we assume that IMAX was filling a bucket that has 180 or 200 joint ventures or whatever, I personally didn't think that one quarter of the way through 2008 that basically three quarters of that bucket would be full.

I think we have done a very, very good job and fast job at trying to put the anchors in place, so to speak, which moves the business -- it goes back to one of Eric's questions, moves the business -- changing the needle from a sales emphasis organization to an execution business. If we execute on that 245 theater backlog, you run your own models, you will see rather dramatic differences in the IMAX financials begin to rollout, kicking in the fourth quarter of '08 and as we said in '09. With that, Rich, any other observations.

Yes, the last thing I would like to say is and those of you who have been shareholders for a while and analysts completely understand this. At times in your business the wind is blowing in your face and the momentum is working against you. At times the wind is really at your back and the momentum is going with you. And both on a macro basis and a Company basis, we have a tremendous amount of momentum. As I mentioned during the remarks, for 2009 we are talking to almost every studio about 16 film projects. The trend towards 3D, which is manifesting itself in 35 millimeter, is definitely a big help to IMAX because we are the premium 3D distribution platform and people who have blockbuster 3D films really want to do them in IMAX.

Even though, as I said, the Speed Racer general box office was disappointing, the continued strong percentage of the box office that we have certainly says to the studios and the exhibitors, if you want to get people off the couch and you want to make real revenues, you do it through IMAX. The growth in the backlog, the nailing down in the financing and it may be hard for many of you to see because the financials are somewhat of a backward looking measurement point, but forward looking I think all the indices we see are extremely positive and I think we feel very good as we go into this digital rollout. And with that said, on the next call I think we will be in part in the rollout and we will have some progress to report to you. Thank you.

Ladies and gentlemen this concludes the conference call for today You may now disconnect your line. Have a great day.