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Author: DCWD40 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 525  
Subject: 2011 Results; 2012 Outlook Date: 2/23/2012 10:21 AM
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According to a headline or two I glanced at, IMAX beat on revenue and earnings for Q4. But, that is not saying much. Revenue was down to $66.7 million from $69.2 million. Income from continuing operations before income taxes (used because last year there was a $53.8 million income tax credit) increased from a puny $878,000 to $9.7 million. There was a record 57 theater systems installed.

http://finance.yahoo.com/news/IMAX-Corporation-Reports-prnew...

The outlook for 2012 is not as strong as might be expected. System installations, the backbone of the revenue stream, is going to be down. Although the backlog increased from 224 to 263, installations are projected to fall to 95-100 from a record 170.

Offering hope for the future is "progress toward introducing best-in-class laser based projection technology." Once this becomes available, the urge to upgrade should be high with theater operators and will stop what could be a long-term flattening or decline in theater installation and upgrade revenue.

The importance of system sales can be seen in Q4 numbers. System sales were $29.8 million while film revenue was $18.1 million. Even after the theater count spiked 33% in 2011, film revenue was only up $100,000 over last year's Q4.

Even better news is that international installations are where the bulk of systems are being installed. The box office last year averaged $184,900 domesticly per screen, $294,700 internationally.

Since the company didn't give guidance it is not possible to know what they think 2012 may offer at the bottom line. Currently there are no movies scheduled for August, September and October. So, for now, the full film slate is unknown. But, it has already been reported that Q1 revenue is vastly stronger than it was last year.

Analysts were looking for earnings to increase to $1.06 in 2012. How that can happen with such a big drop in system sales is unknown. For film revenue to fill the gap as installation revenues fall, films would have to jump by over 100% and that doesn't seem likely -- although a blow-out season at the box office could do that now that there are so many installed theaters and the company is having success getting close to an averaging of two new movies a month.

The only great news I see in today's report is that, finally, film revenue should get close to or exceed system revenue in 2012. For years people have been talking about how well IMAX was doing at the box office. But, when you looked at the trickle of money coming in and you realize how small the theater base was, you realized IMAX needed to grow theaters before it could really make money showing films.

Profitability should start to move strongly for films now that IMAX is digital. The cost of moving prints to the screens is now no longer a cost hurting results. Ticket prices remain high. The cost to produce remain in line. The net effect should start to increase profit margins noticeably if this year's film slate is strong.

The conference call will be what moves the stock today. Given the fall in system sales, the recent strength because of the new China deal should be muted. I would ot expect to see the stock down by the end of today. However, the stock is up $.25 as I write this.

How the stock responds on Monday, after Lions Gate announces how pre-sales are going to Hunger Games, might be the next near-term catalyst that gages investor in IMAX interest based on this year's film slate.

W.D.
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