Welcome to IMAX Corporations’ Q4 Earnings Conference Call. Please note that today’s conference is being recorded. At this time, I would like to turn the conference over to Bradley Wechsler for opening remarks and introduction. Please go ahead sir.

Thank you very much operator. Good morning everyone. Thank you very much for joining us on today’s Fourth Quarter and Fiscal 2007 Conference Call. Joining me is my partner, Co-Chairman and Co-CEO Richard Gelfond. Also with us are CFO, Joseph Sparacio, and General Counsel Robert 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 statements that are forward-looking in that they pertain to future results or occurrences. Actual future results or occurrences 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 affect our future results and occurrences. During today’s call, references will be made to certain non-GAAP financial measures as defined by Regulation G of the Securities and Exchange Commission. Discussion of the management’s use of these measures and reconciliations to GAAP measures are contained in the company’s earnings release in our 10-K for fiscal 2007 which will be filed later today. The full text of the earnings release along with reporting financial table is available on our website www.imax.com. Today’s conference call is being webcast in its entirety on our website. Please note that later on in the call we will be referencing slides that are being simultaneously webcast on www.imax.com. To access the presentation, click on ‘Company Info’ and then click ‘Investor Relations.’ 2007 was a watershed year in IMAX’s 40-year history. Among other things, we made significant progress in transitioning from film to a digital platform, introduced a new business model, had the best film year in our history, and signed 144 new systems, 110 of which were JVs, all on an existing network of approximately 300 open theaters. Despite our strategic achievements,…

Thanks Brad. I’d like to begin by discussing recent developments and then I’ll take you through our film slate and discuss what all this means for the business in fiscal 2008. This past Monday we announced the largest lease deal and the second largest theater deal in our 40-year history with RACIMEC International Group. RACIMEC is one of the most prominent entertainment and public gaming companies in the world developing gaming applications such as Lotto and Soccer Lottery for various Latin American countries including Brazil, Chile, Argentina, Venezuela, Columbia, and Paraguay. Under the terms of our agreement, we will work with RACIMEC to install 35 IMAX Digital projection systems in South and Central America and the Caribbean over the next 5 years. RACIMEC will buy the systems from IMAX under our standard lease arrangement where we receive significant cash upfront and subsequent minimums against the royalty and then RACIMEC will work out arrangements with its partners which include developers, exhibitors, and other entertainment operators per negotiated economic terms. RACIMEC will then work with their clients to identify the best location based on market demographics and cultural trends which will ultimately result in a substantial network of IMAX theaters throughout the region. This deal will bring capital to these underdeveloped regions while providing IMAX with a contracted cash flow. We are very excited in the hands-up presence in South and Central America so significantly and are pleased to be working with such a well-respected and experienced business innovator who has significant expertise in the region. It is not only this lease deal that is testament to the strong and growing exhibitor interest in IMAX. As Brad indicated, interest in joint ventures gained significant momentum following the announcement of our deal with AMC. We are currently in negotiations with a number of…

(Operator Instructions) And our first question will come from Eric Wold of Merriman Curhan Ford. Please go ahead.

Good morning!

Hi Eric

A couple of questions. I know you probably won’t get too granular on guidance or projections, but in the number of installs for this year, what should we think about? It turns out obviously it’s not going to give you a lot in the first half of the year until digital comes out. What should we think about in terms of mixing first half and second half results?

I don’t think we are going to break that out by quarter, but we try to be reasonably clear about our expectations. In the speech, I don’t know if you heard the whole thing. What we said was in ’08, we expect 25 to 30 joint ventures and 12 to 14 sales or sales type leases out of our current backlog. We also expect to install 3 MPX film systems in the early part of the year; however, we won’t recognize revenue on those until they are upgraded to digital probably in 2009, and then our third category which is sign-and-installs, and I think many of you know, those are systems that we’ll sign in ’08 but also install in ’08, we expect between 15 and 20 sign-and-installs roughly split 50:50 between joint ventures and sales-type leases, so hopefully that gives you a framework to work with.

Eric, obviously the digital won’t really be installed until the second half of the year, so that gives you a framework to understand the waiting.

Right, I understand that. I got all the numbers from the beginning. So is it a safe assumption that really no one wants to install anything until digital is there, so people push the majority of everything into the back half of the year?

No, I don’t think it’s an assumption that no one wants to sign anything, Eric. There will be installs in the first and second quarter. Some of them, as Brad said, we won’t be able to recognize because they’ll be subject to upgrades, but others that we’ll be installing will be recognized, so that’s not a reasonable assumption, Eric.

That makes sense. I know there is almost nothing in the first half of the year anyway, so to confirm that that has to change. That’s what most people are expecting anyway, so that’s fine. Secondly on the box office, it looks like you guys – and hopefully the trend continues – are getting more successful and garnering a greater revenue share percentage. You talked about that 10% to 15% range of box office you get from the studios, can you talk about how you have been moving maybe closer to higher in that range and maybe what the average is right now versus maybe where it was a year or two years ago?

Eric, you are absolutely correct. It gives me an opportunity to say something which I didn’t really emphasize in the speech. I think from our perspective, Richard’s and mine, we delivered a whole much of really interesting good news about what we’re seeing in our business. One number or a series of numbers that huff out at us and it’s an incredible validation of what we’re talking about in terms of building a network is the same-store sales growth of DMR revenues of 48% year over year, the network growth of 56% year over year, and then the number when we really talk granular and really look at our participation of DMR, it was 81% growth year over year, which obviously means that not only are we getting network economics, but it’s the point that you just made that we were over-indexing on that 10% to 15% or that 12.5%, and that is really because of some deals we bet on ourselves and we took the upside because we knew what was going on in the IMAX network and the way it was growing, and we were able to structure deals that ended up yielding us a disproportionate part of DMR benefits.

Any reason why that shouldn’t continue?

Trees don’t go the sky, but I think from our perspective, you should continue to see really great operating leverage in the film business, particularly as the network grows.

In some of the deals we have in the future, Eric, where we cross a certain threshold, we move to a higher level of recruitment, so it’s based on performance. We’ve been able to get that more or so now than a few years ago, I think, because of the function that the films are performing better.

Lastly, on the number of films obviously going to digital allows you to put out more films, and you talked about 10+ versus where you are now. Talk about how fast you could get to that higher level. Is that a 2010 situation versus ’09, and has the dynamics changed where we are putting out more movies, does that mean that the window of a movie is shorter? Do you start showing more movies on top of each other where theaters have two movies – one being showed during the day and one night?

I think especially initially, Eric, it’s going to be shorter playing times for each of the movies rather than playing two films at the same time. The reason for the fact that it’s 6 or 7 movies now as you know is the high cost of print. It’s $25,000 to $45,000. When that cost virtually goes away, there are virtually no barriers to the studios to releasing a film in IMAX. It’s just a minimal marketing cost. As a result, the studio doesn’t need a 6- or 7-week window. They only need a 3- or 4-week window, so that’s the dynamic which will drive the ability to release more films. Now, when is it going to happen? I think you might see the beginnings of it in ’09. I don’t think it’s like a switch and we’ll go from 6 to 7 to 10 to 12. Maybe ’09 would be 7 or 8, something like that, and then ’10, you’d see a fuller slate kick in, because it’s partly a function of the transition. Film theaters aren’t going to disappear overnight. There will be a few years to work through that changeover, but I would think that by 2010, it’s likely that you’d see much of that underway already. The dynamic from the studios is incredibly helpful because as you know most of the box office is done in the first 3 or 4 weeks of the movie, so we are losing some box office on the films that we would have kept open, but you will be replacing them by the opening weekends of additional blockbusters, and that should have an extremely positive revenue impact on the network.

Perfect. Thank you guys, appreciate it.

Once again, ladies and gentlemen, if you do have any question, please press *1 on your touchtone phone at this time. Our next question will now come from Rich Ingrassia from Roth Capital Partners.

Thanks. Good morning everybody.

Good morning.

I would expect that as your digital footprint grows your exhibitor partners will be able to create pre-show packages and maybe some non-movie content which they haven’t been able to do before. Could you say a little more about that, if it would mean anything directly to your P&L, if you think it would maybe just improve your sales proposition to the exhibitors?

Let me just start on #2 to which I can add. One thing is obviously it’s tough to re-show, but as you go digital, obviously you can do live programming and you have programming flexibility. You can do World Cup Soccer or you can do basketball and you can do the opera, which was attempted already and does very well. Those kinds of things would have impact obviously to our profitability. With respect to packaging of re-shows, I am not exactly clear…

Advertising…

Advertising…that’s a more complicated issue, and I don’t know how to answer that. Generally speaking this is some of the shelf space that the exhibitors keep for themselves. On the other hand, historically, we’ve kept advertising out of IMAX boxes, so I don’t have a clear answer on that. Rich, you have anything to add?

No.

Okay. A couple more questions. I understand obviously that all the new deals are for digital systems, but can you talk a bit about plans for upgrading and replacing still projectors and leases that have been in place for more than a year, and what you expect the economic impact would be for that cycle over the next couple of years.

I think you have to think of three separate boxes, Rich. First think of the deals that we signed years ago and have no digital upgrade language and were installed years ago, which is obviously the bulk of our network. Those are opportunities for us to go back and to sell digital upgrades, and I think internally we are thinking in the area of about $300,000 in margin per sale for selling those digital upgrades, so that’s a large portion of the existing network. That’s the first box. The second box is people who have contracted for a film-based system but have not yet had it installed, so most of those people if not all will want a digital system instead of a film system, and we’re in the process of starting to negotiate with people in the backlog over that issue. Now the good news for us is that the cost of goods sold in a digital system is less than the cost of goods sold in a film system, so to an extent, if we deliver a digital projector instead of a film projector, we should have a higher margin. The third pocket is where we’ve contracted to upgrade the digital system and we’ve installed a film system, and at the moment that looks like about 15 theaters, and they range in terms of our duty to upgrade from putting up all the money, to a cap on the money we put up, to sharing the amount of money we put up. If you assume we pay for all of them on those 15 – our cost of goods sold is around $300,000 – do it would be around $4.5 million, and some of the ones that we’re required to upgrade are joint ventures, but at the time of the upgrade, we extended as if it’s a new term, so we get that benefit.

Thanks for that detail. The costs there are included in your capital needs that you stated previously in the call?

We’ve modeled in the ones where we have contractual duties, yes.

Okay. Two more questions, if that’s alright. If I remember correctly there was a time when you were talking to Sony about becoming your digital projection vendor. Now, I see it’s TI. What happened there and did you find the same issues with reliability and costs that Sony carried that the rest of the industry has been citing?

I think you may have answered the question at the end of your question maybe a little more harshly I would have. We wanted to get out there with a digital projection system quickly. Initially we had issues as to whether we could do it with underlying TI technology because of our requirements with light output and resolution. Through extensive testing when we were working both Sony light engines and TI light engines, we came to the conclusion that we can get IMAX quality imagery working with two TI light engines with intervening IMAX IP, and because TI had been out there, they are first to market, and durability had already been tested – I think there are thousands of them out there already – we figured that we should launch with TI, and I was delighted that we were able to officially announce that just a few days ago.

That’s what I figured. Last question. Any chance you can squeeze in Lucas’ animated Star Wars feature here in August between Dark Knight and Harry Potter?

In terms of, I think I can give you a general answer, I can’t give you a specific answer which is, there is a gap between Dark Knight and Harry Potter and that is a gap that we would like to fill.

Okay. Thank you.

Thank you. And at this time, Mr. Wechsler we have no other questions, so I’d like to turn everything back over to you, sir.

Again, why don’t I say a couple of remarks and then Mr. Gelfond will as well. I think it’s got to be clear from our remarks today that we’re pretty excited about what we are seeing in terms of all the forward indicators and everything that’s going on in our business. Obviously, we paid sort of a financial price in terms of the transition and the financials haven’t looked very good. Our fundamental view is financials in our organization will often may not tend to be backward looking as opposed to forward looking and today I think we spent an awful lot of time talking about the really exciting things that we see going on in the business which aren’t that specularly. A lot of them – we’re talking about backlog projects, we’re talking about signed deals, we’re talking about actual films and film performance, and I think as we look forward we see the world looks very different than it has in the last couple of years. Rich…

Now, Brad gave sort of a quantitative, and so I’ll give a little bit more of a qualitative answer which is that we just got back on Wednesday evening from ShoWest which is the industry conference, and all the leading studio heads were there and all the heads of the major exhibition organizations – not just the North America but from around the world – and if you were IMAX 3 or 4 years ago, you would have seen that metaphorically we sat in a corner by ourselves with our megaphones sort of yelling, “hey world, we’re over here,” but again being metaphoric, today, especially with all buzz around the release of 3D films which many have read in the papers, so was a big focus of it; metaphorically, we were sitting right in the middle, and we had meetings with the heads of most of the major North American exhibitors, many many international exhibitors, we spoke at the international lunch, many of the senior studio executives, and there was a difference between being an outsider and a real insider, and I think that’s a different way of saying what Brad is saying from a quantitative point of view. From a qualitative point of view, we’ve really evolved the business; whereas we had to break into the club, now we’re members of the club, and I think that is going to manifest itself very shortly in financial results. And with that, thank you all for joining us and we’ll talk to you shortly on the next quarterly call.

Thank you. Ladies and gentlemen, this does conclude your conference call. Once again, thank you for participating and at this time we ask that you please disconnect your line. Have yourself a good weekend!