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Non-Tech : IMAX 3D-the wave of the future -- Ignore unavailable to you. Want to Upgrade?

To: JAMES BORECKI who wrote (48)	3/12/1998 1:00:00 PM
From: bythepark	Read Replies (1) \| Respond to of 170

That is a GREAT Read: Moody's Upgrade of IMAX's bonds Thanks for the 'Heads Up' --alan Thursday March 12, 9:46 am Eastern TimeMoody's ups Imax Corp ratings (Press release provided by Moody's Investors Service) NEW YORK, March 12 - Moody's Investors Service upgraded Imax Corporation's (Nasdaq:IMAXF - news; Imax) $65 million of senior notes due 2001 to Ba2 from B1 and its $100 million of convertible subordinated notes due 2003 to B1 from B3. The outlook is stable. The ratings and upgrades reflect Imax's leading worldwide position and well-recognized brand name in the fast growing large-format film industry, with increasing geographic diversification providing both a hedge against regional and/or country cyclicality and a means to support further growth; its improving credit profile, including rapid growth, strong operating results and a generally healthy balance sheet; and the critical mass of the company's existing theater network and growing film library on a prospective basis to incorporate contracts in backlog, which enhances the stability and recurring nature of its revenue stream and strengthens cash flow coverage of debt service given the high-margin nature of its business. However, the ratings continue to reflect the risks surrounding the company's plan to broadly commercialize its large-screen theaters, including higher penetration of 3D systems and expansion into more owned-and-operated theaters; the increasingly competitive market for general out-of-home entertainment and the movie exhibition industry more specifically, with the potential for technological obsolescence if a more competitive presentation format is developed; the potential for increased financial leverage to support continued growth and/or to make distributions, consistent with the generally flexible structure of the existing indentures; and the risks of insufficient and/or unsuccessful commercial product available in the large-screen format to fill the increased capacity afforded by the company's expanded and still rapidly growing theater network. Imax operates in a growing but rapidly changing competitive environment and is at risk from the development of alternative film projection and production technology that may increase pressure on its currently high margins.However, the ratings incorporate Imax's strong potential to maintain and/or grow its market share as the company further diversifies its product line beyond its traditional outlets (i.e.; museums and theme parks) and establishes more depth in its international franchise and a growing presence in commercial theater venues with its new SR product. Competitive risk could be heightened, however, given the company's insular shift from the institutional to the commercial sector, particularly if this strategy is successful, which could alter the currently attractive economics and operating performance of its business. Until recently, Imax has focused on supplying technology to IMAX theaters built and owned by third-party operators.Management now plans to augment and broaden its revenue mix by developing and operating its own theaters, which will most likely be concentrated in heavily populated suburban areas, mainly in the U.S. and Canada, rather than in cities. The company's challenge, in addition to proving its ability to manage theaters, will be to avoid market saturation through overlaps with the present IMAX theater network. Although this initiative will increase financial risks by immobilizing capital, there is considerable upside potential in terms of higher revenues and enhanced returns to be realized from maintaining an equity participation in its theaters. Moody's also expects that this owned-and-operated strategy will be limited to a relatively small number of theater locations compared to the overall size of Imax's installed theater base. The company's liquidity position is fairly strong at present, with nearly $75 million of cash andequivalents and C$10 million of available bank borrowings at 12/31/97, but will likely decline as Imax continues funding the development of new theaters and films. Over the near-term, Imax will be supported by a healthy backlog of orders for its systems. Although Imax's sizable operating margins have historically been produced by its unique position in the market and lack of a viable competitive product, they will be more susceptible to decline if the company encounters increased pricing pressure. The company's diverse customer base and long list of products in operation provide it with a firm base of recurring revenues, however. Key to maintaining the upgraded ratings will be management's ability to continue its highly successful track record of new system signings, which ultimately drives Imax's business and subsequently enhances the more stable and somewhat annuity-like cash flow streams realized through the ongoing collection of higher royalty, lease, and maintenance payments associated with a larger network.