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IMAX Corporation (NYSE:IMAX)

IMAX China Transition Investor Conference Call

April 8, 2014 8:00 AM ET

Executives

Teri Loxam – Vice President-Investor Relations

Richard L. Gelfond – Chief Executive Officer and Director

Rui-Gang Li – Chairman, China Media Capital

Frank Tang – Chief Executive Officer, FountainVest Partners

Analysts

Townsend Buckles – JPMorgan Securities LLC

James M. Marsh – Piper Jaffray & Co.

Aravinda Galappatthige – Canaccord Genuity Corp.

Vasily Karasyov – Sterne, Agee & Leach

Daniel Ernst – Hudson Square Research, Inc.

Benjamin Mogil – Stifel Nicolaus Canada, Inc.

Marla S. Backer – Ascendiant Capital Markets LLC

Operator

Good day and welcome to the IMAX China Transition Investor Conference Call. All participants are currently in a listen-only mode. Following the presentation we will conduct a question-and-answer session. (Operator Instructions) Today’s conference is being recorded.

At this time, I would like to turn the conference over to Ms. Teri Loxam, Vice President of Investor Relations. Please go ahead.

Teri Loxam

Thanks, Mitchell. Good morning and thank you for joining us on such short notice this morning for our today’s conference call to review the transaction that we announced this morning for the investment by two strategic Chinese investors to buy 20% stake in our IMAX China business.

Joining me today from IMAX is our CEO, Rich Gelfond who will have prepared remarks, as well as Joe Sparacio, our CFO; and Rob Lister, our Chief Legal Officer and Head of Business Development who will join us for the Q&A portion of the call.

In addition, we are happy to be accompanied on the call today by Rui-Gang Li, the Chairman of CMC and Frank Tang, the Managing Partner of FountainVest. Mr. Li and Mr. Tang will each make a brief statement after Richards prepared remarks.

I would like to remind you the following information regarding forward-looking statements. Our comments and answers to your questions on this call may include statements that are forward-looking and that they pertain to future results or outcomes. 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 outcomes.

During today’s call, references maybe made to certain non-GAAP financial measures as defined by Regulation G of the Securities and Exchange Commission. Discussion of management’s use for these measures and a definition of these measures as well as reconciliation to adjusted EPS and adjusted EBITDA as defined by our credit facility are contained in the company’s latest Annual Report on Form 10-K. Our latest 10-K is available on our website imax.com. Today’s conference call is being webcast in its entirety on our website.

With that, let me turn the call over to Rich Gelfond.

Richard L. Gelfond

Thanks, Teri. Good morning, everyone, and thanks for joining us on such short notice. I am delighted to be here this morning telling you about the strategic deal. We’ve been building our business in China for over 15 years, and in that time we have developed strong relationships across multiple levels of the Chinese government, business community, and consumers affording us the opportunity to learn and appreciate the Chinese culture in entertainment industry.

The knowledge, experience, and friendships that we have gained along the way have helped us to establish a very successful business in China. Our network has grown from nine theaters in 2008 to 150 commercial theaters today with another 240 theaters in backlog, we will be approaching 400 theaters in the China network over the next several years, which is bigger than our current North American network.

In addition to our footprint expansion, we have achieved other important milestones in China. We now play numerous local Chinese films in addition to our Hollywood films. We introduced our revenue-sharing model in the region. Our brand is as well known in China as anywhere else in the world and we have built valuable partnerships with key players such as Wanda, CJ CGV, TCL, local studios, and many others.

We have approached our China strategy in stages. The first stage was to build the relationships and create a business model that work for IMAX and for China.

Second stage was to operate the China business more locally, which we did by hiring a Chinese CEO and by establishing IMAX China as the separate operating subsidiary in 2011. IMAX China has almost 60 employees most of whom are Chinese.

The third stage which we embarked on today is to introduce partial Chinese ownership in IMAX China, which we believe is an important component in our continued evolution. Note, it’s my great pleasure to announce today the two strategic Chinese investors CMC Capital Partners, which I will refer to as CMC and FountainVest Partners are investing $80 million to buy a 20% stake in IMAX China. We are strategically aligned with these Chinese investors to grow the business with a goal of taking IMAX China public in China within five years.

FountainVest is one of the largest private equity funds dedicated to China with a focus on consumer and media and targeting long-term investments and high growth industry leaders.

CMC led by Rui-Gang Li is one of China’s leading investment funds focused on media and entertainment. Mr. Li has a master of wealth of industry, political, and leadership experience over his career and possesses a deep understanding of not only our business, but the industry, the Chinese economy, and local governments.

Rui-Gang Li is also the Chairman of the Shanghai Media Group and its former CEO. Under Mr. Li’s leadership, Shanghai Media Group became China’s second largest broadcaster and the Chinese conglomerate with the most diversified business scope in media and entertainment. Some of CMC’s strategic investments include a partnership with Time Warner, a joint venture with DreamWorks Animation, and the acquisition of Star China from News Corp.

CMC also has investments in sectors such as film, advertising, sports, gaming, and the Internet. We see today’s transaction as the next step in our long-term China strategy. It was very important for us to find the right strategic investors to help us drive long-term value for our business, and we think that CMC and FountainVest are exactly the partners we were seeking.

We believe their unparallell reputations, leadership and expertise will be invaluable and helping us to achieve our next phase of growth. We strongly believe the partnership will further strengthen IMAX’s competitive position in the region, and enable us to even better navigate the political and economic landscape in China in the years ahead.

Our key priorities remain the same, the continued expansion of the IMAX China theatre network, sustained performance of IMAX’s Hollywood and local Chinese titles, and the further strengthening of government and industry relationship. We believe these objectives will benefit greatly from our new partners, political presence, and their vast knowledge of the Chinese media and entertainment industry.

Our alternative plan is to conduct an initial public offering within the next five years, assuming appropriate business, market, and regulatory conditions. We believe this long-term China strategy could unlock significant value in our China business for our IMAX Corporation shareholders, as well as our partners.

As part of today’s transaction, nine-member of Board of Directors will be established for IMAX in China. The Board will be comprised of six IMAX employee appointees and one appointee from each of CMC and FountainVest and an independent member to be nominated by the newly formed board. Through its subsidiaries, IMAX China has the right to conduct the IMAX business in Greater China.

IMAX China will also pay IMAX Corporation, the trademark and technology licensing fee and costs associated with ongoing business activities such as equipment, maintenance services, and DMR services.

IMAX Corporation will continue to consolidate the IMAX China business with the 20% investment reflected as the minority interest in our P&L. The proceeds from this transaction along with our forecasted cash flows from our ongoing business, but this been a very strong financial position. We intent to leave a portion of the proceeds from this transaction in China to fund the build out of the China JV theaters, as well as for the China expenses and other growth initiatives.

We anticipate bringing back about half of the proceeds to IMAX Corp. in a tax efficient manner. IMAX already enjoys strong brand record, the leading premium entrainment option in the Chinese market, and has become the preferred way to experience both Chinese and Hollywood blockbusters in the region.

The investment today by CMC and FountainVest is a testament to their confidence and the strength of the IMAX business in China and the opportunities that lie ahead. We will be opening it up to your question shortly, but first, I would like to turn it over to Rui-Gang of CMC, Frank Tang of FountainVest for brief remarks. Mr. Li, please go ahead.

Rui-Gang Li

Thank you, Rich, and its real to be a part of this transaction and to join the IMAX family. IMAX has done an excellent job building a premium asset and will admit brand in China over the past several years. I believe IMAX still has a tremendous growth ahead of it. And I look forward to contributing to IMAX success, slow CMC’s experience, relationships, and the strategic input. I’m very optimistic, we can support IMAX as it continues to build its existing business, establishing new opportunities in the region and ultimately ensure IMAX achieves its full potential in China.

With this, I will turn it over to Mr. Tang from FountainVest, who also has some comments to share. Mr. Tang?

Frank Tang

Thanks, Mr. Li. FountainVest is a China dedicated long-term investor with the focus on the consumption teams, but we have invested in many companies that are benefiting from the rising middle class in China. Over the last several years, I have gotten to know Rich and IMAX team very well. I am confident that this will be a mutually beneficial relationship, and believe FountainVest has significant experience across segment investments and expertise with China’s capital markets we have will serve IMAX China well. We look forward to helping IMAX China to capitalize on its next phase of growth and help position the China – to help position the company as a good IPO candidate in all part of the world. Thanks and with that I will turn it back to Rich.

Richard L. Gelfond

Thank you both very much for joining us and for your remarks. Operator we can now open up the call for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from Townsend Buckles of JPMorgan. Please go ahead.

Townsend Buckles – JPMorgan Securities LLC

Thanks, and if you could talk a bit more about the strategic benefits of this deal with this partnership can help you accomplish easier or faster than on your own and it’s really about ensuring the core business continues to grow smoothly or maybe plans you may have to extend into other directions like the TCL initiatives and you mentioned supporting local content or other areas?

Richard L. Gelfond

Well, I think the answer Townsend it’s really both, on the one hand since, over the long-term we are aiming to do an IPO, we believe that an IPO will be much more successful over the five-year time period with the right Chinese partner and in fact we have a very deliberately chosen mix. So in FountainVest, you have a very disciplined financial institution with a history of success in bringing companies public and the knowledge and the ability to help us steer that environment. And in Rui-Gang and CMC you have one of the most integrated, and knowledgeable, and connected media technology funds in all of China, that brings relationships from the business community as well as the government and the financial community. So I think – so that’s the first part which is IPO and I think like in the U.S. if you want to bring a company public having the right partners, and the right knowledge and the expertise of how to do that is a very good thing and it’s good to start early and integrated into your company.

And second of all it will provide further integration into the Chinese political community and the Chinese business community. I think we’ve done a very good job; it’s a matter of fact over a 15 years, I think it was done as good a job, as any foreign company has done, but it still different being a foreign company versus really knowing the in’s and out’s to that particular region. And I think the relationships our partner bring us will help us navigate even better than we have, and I know Townsend because you and I have discussed it many times, you know the way I look at China is a little bit like a portfolio graph, where there are ups and downs that over time it’s on a upward trajectory and I think this will help us out more ups than downs, few are down and increase the slope of that trajectory.

I think it will help us on the theatre side, as a matter of fact we’ve already been discussing with our partners, certain opportunities that they can bring to us that we were unaware of in fact one of them which has been finalized yet as this major development project in Shanghai that I think will be anchored by a fairly significant IMAX theatre and there are number of other things that we started to discuss.

It will also broaden our opportunities for new businesses both FountainVest and CMC through their funds are in a number of media growth related investments as well as other investments. And I think given the strength of our brand in China and given the cash flow that’s going to accumulate, over time we are going to try and look for different opportunities and I think they are the perfect partner to not only source those opportunities, but to help us understand who we are in business with and give their views on structure, and scope, and as a matter of fact our TCL joint venture which we announced in the last year, which is the home theatre even though the deal wasn’t consummated, we got a number of insights into the ways we might operate and who we might partner with, and how we might proceed from both Frank and from Rui-Gang, so it’s really both now.

Townsend Buckles – JPMorgan Securities LLC

Thanks, that’s helpful. And I guess if you could talk about what you want to have accomplished before going forward with an IPO. Is it about just being further along in your theater rollout and the growing cinema market, or are there other milestones we should keep in mind?

Richard L. Gelfond

I mean, there are number of milestones, I think one of the biggest ones will be financial and, in fact, the investors, according to formulas you will see in the document, you are looking for an IPO in the rage of $900 million to $1 billion. And I think that will be one primary driver of it is, how quickly we can build up the company to achieve that kind of valuation. I think it will also be further penetration of the theatre network and some of that will be that difficult, because we have the 200 plus theaters in backlog.

So that will be a build out. I think part of it will be new theaters and new other projects. And then we had always hoped that we could have other businesses to add on to increase the valuation and increase the sets of deal or what might be an IPO. And as I said before, I think our partners will help us to achieve that.

Townsend Buckles – JPMorgan Securities LLC

It sounds good. Thanks, Rich.

Operator

Thank you. The next question comes from James Marsh of Piper Jaffray. Please go ahead.

James M. Marsh – Piper Jaffray & Co.

Great, thanks very much. Two quick questions; first, I was hoping you guys could shed a little light on how you determined the value of a 20% stake in IMAX China?

And then secondly, as we look down the road here, should we expect dramatically different capital structures, return of capital profiles, and I guess investment requirements between the two companies? I mean should we look at the, I guess, the IMAX US or actually I guess IMAX non-China business returning capital more aggressively to shareholders while maybe the IMAX China business is more designed to deploy new screens and generate organic growth?

Richard L. Gelfond

I wouldn’t think about it, but yet the second part of your question, that way, James I think, the business outside of China is doing extremely well right now as you know. In the first quarter we have reported our results, but from a signings point of view was quite strong. Recently, we announced 11-theatre deal in Europe and parts of the Middle East. I think we see a lot of markets outside of China growing extremely rapidly. So I don’t really think that this deal per say has much impact on how we conduct the rest of our business, I think, we’re going to conduct it the way we conducted it.

In terms of the valuation that the investors bought in at in IMAX China, that’s been heavily negotiated and, in fact, parts of this deal have been going on for years literally. And there have been a number of different iterations over the period of time. As you know, there are complex issues that go into these kinds of things. The most important thing for us was to find the right strategic partner that can take the business to the next level and, of course, we were concerned about valuation.

You’ll be happy to know that our partners are tough guys. They like to make money, and you will be happy to know that we’re tough guys, and we like to make money. This is one reason that it took so long and it was a combination of both sides that agreed eventually.

Obviously, the investors argued that because it’s China and there are certain risks there that a higher discount rate has to be applied versus the exit strategy and because we had backlog and other characteristics, we argued a lower discount rate applied. And eventually as I said, we turned out in a place, where we were comfortable, we were being fairly compensated, and they felt they had sufficient upsides to get dedicate the time and resources and their reputations help grow the business.

James M. Marsh – Piper Jaffray & Co.

Okay. And I just had one final follow-up here. Should we think of this as somewhat of an insurance policy for your China backlog? I mean obviously deeper political and local relationships in that market are important. Is there an element of risk reduction in your mind as well from this structure?

Richard L. Gelfond

I never use the word insurance because I feel, and you look at it we built out not only on schedule, but ahead of schedule over time, and in fact, when you look at the number of installs coming this year, again in China they appear on time and we really haven’t had a major difficulties at all in China. On the other hand, when you talk about risk reduction, I think having kind of the lineup of partners that we have in China was before this transaction included Wanda and TCL and over time, I don’t want to tease, but there will be other things to come. We are working on other things and you add to that line of Rui-Gang, and Frank Tang, and FountainVest, you always want to operate in the highest return, lowest risk environment you can.

James M. Marsh – Piper Jaffray & Co.

That’s helpful, thanks very much.

Operator

Thank you. Your next question comes from Eric Handler of MKM Partners. Please go ahead.

Eric O. Handler – MKM Partners LLC

Yes, thanks for taking my question. Just a follow-up to James’ last question regarding valuation. It looks like – so the IMAX China valuation right now is about $400 million. That’s about 21% of your current market cap. That’s only a slight premium to – the China market last year was 19.5% of your revenue. So when you think about valuation, how does this look on an EBITDA basis? What’s sort of like your EBITDA margin on that $56.5 million of revenue that you guys generated last year?

Richard L. Gelfond

We will be happy to elaborate on a later smaller call, follow-up call, if you want to have one, but in terms of – that’s not the way we looked at this field. I mean we looked at this field, as you say that the valuation is consistent with the valuation of the overall business. On the other hand, as I said, in James’ call, you had a number of crosscurrents here, on the one hand, you had a higher discount rate because it was China and whether certainly as you know, because I know you have followed us for a long time, the risk have not really been material, but I think there has been the perception of risk in China. So as a result, you had a higher discount rate going there.

On the other hand, you really wanted to get the right partners. So we didn’t go out to the world and say and have an auction and say fill in the blank and tell us what you are going to pay and get the highest value, because we were more focused on the fact that we have 80% ownership left and who was the right partner. And that had a lot more to do with methodology then getting another dollar off the table.

Eric O. Handler – MKM Partners LLC

Great. And then as a follow-up, what’s the reason specifically that you are looking at this now? When you look at your business you don’t need the cash, you’ve been operating very well in China. You’ve been expanding. You’ve got 400 with opened and backlogged screens. Have you sort of hit a wall in terms of how far you can go on your own without having a strategic partner?

Richard L. Gelfond

Not at all and obviously CMC and FountainVest certainly don’t think we’ve hit a wall after doing years worth of research. We did it now because we think, we were negotiating from a position of strength and the business is strong right now. As you know, last year is the most signings we ever had in a year, and we have tremendous momentum. As a matter of fact of this last weekend Captain America 2, opened in China and IMAX did 11% of the box office, sort of $4 million. Now, I remind you, the movie is called Captain America and we did 11% in China.

So I think, we are in pretty good shape and I think, our business is cranking there. So when, if you were in my shoes would you rather do a deal when you were in a position of strength and your business was going well, or would you rather do a deal when you hit a speed bump I think now it’s the right time to do it.

Eric O. Handler – MKM Partners LLC

Great. Thanks, Rich.

Operator

Thank you. The next question comes from Aravinda Galappatthige of Canaccord Genuity. Please go ahead.

Aravinda Galappatthige Canaccord Genuity Corp.

Good morning, thanks for taking my questions. Just a couple from me. First of all, Rich, is it safe to assume that even at the point of an IPO that IMAX would still retain control or say over 50% of IMAX China? And then secondly, do you think that – one of the challenges you have had in China is sort of the protection of your IP. Do you think that this sort of transaction sort of helps you sort of navigate through the complexities of that as well and maybe get some reprieve on that front?

Richard L. Gelfond

I’m sorry, the second part I didn’t really follow Aravinda.

Aravinda Galappatthige – Canaccord Genuity

Yes, Rich. I know one of the challenges that you’ve had is the protection of your patents in China and that sort of been a complexity in terms of operating in China. Would this conceivably help you with that on that front as well to try and protect your patents better and sort of helping you navigate through that issue as well?

Richard L. Gelfond

I think potentially the answer is yes to that Aravinda. I think that knowing our way around and I’m not being an outsider and being part of the fabric, the local fabric, is always a good thing, even in the United States everywhere in the world, I think there is such a thing as home field advantage, and I think it will help us on that.

With that said the competitor in China has about 31 screens, including their backlog versus our 400 and doesn’t really have sort of the countrywide network we have, the films, the technology, and the performance of those theaters vastly look as about half or less than half of the performance to the IMAX theaters. So let me be clear that was not a reason for doing this. But I think over the very long-term, internally can help to have more local friends.

Teri Loxam

Control on IPO.

Richard L. Gelfond

Yes. And the first one is that, we would intend to keep a majority stake in the event we do an IPO.

Aravinda Galappatthige – Canaccord Genuity

Great. Thanks for that, Rich. I’ll leave it there.

Operator

Thank you. The next question comes from Vasily Karasyov of Sterne, Agee. Please go ahead.

Vasily Karasyov – Sterne, Agee & Leach

Good morning. Rich, why 20% is there magic to that number? And then I don’t think the 8-K has been filed yet; can you tell us if either of the parties have an out before the IPO and what would trigger that? And then as a follow-up, should we expect similar approach in other parts of the world or is it just unique to China?

Richard L. Gelfond

They don’t have an out before an IPO. They do have certain rights, because their minority shareholders will hold shares in better illiquid. So in the event we don’t do an IPO, they have a number of rights, and they are kind of detail that complex and I suggest you read the 8-K about them, because they’re difficult to describe and heavily negotiated, whether we do this in another country or not, I think we’ll have to see there is not really the scale unless you look at a North America, which is part of the core business. But, for example, a country you could pull out of a half would be somewhere like in India, which is now a small country for us, but if it developed into a very large territory, that’s something we could certainly think about. But this isn’t a model we really intend to replicate.

I mean, one of the things I should mention is part of the reason of that I went down this road starting a couple of years ago. As I looked at the success of Yahoo! Japan, which they set up many years ago, and I think you know at times, Yahoo! Japan’s valuation exceeded that of the Yahoo, the parent company. And I thought it was just a very genius way to unlock value and capitalize on local market tactics. And that was really the template for this idea.

Now, in terms of why 20%, again, it was a negotiation. We wanted to sell enough where our partners had a stake in the enterprise, but not too much, because we think that’s a very long way to go. And as I said this really wasn’t about an exit strategy today. This was about building the company to make it a much larger scale to get some liquidity five years from now. So selling more than 20% really didn’t work for us and, in fact, there were stages in the negotiation, where we negotiated over the amount that we consistently said 20% was the mostly itself.

Vasily Karasyov – Sterne, Agee & Leach

Okay. Thank you very much.

Teri Loxam

See, this – really the 8-K is being filed very shortly, we’re in the process of getting that out.

Vasily Karasyov – Sterne, Agee & Leach

Thanks, Teri.

Operator

Thank you. The next question comes from Daniel Ernst of Hudson Square. Please go ahead.

Daniel Ernst – Hudson Square Research, Inc.

Yes. Good morning, thanks for taking my call. Just a quick comment on the valuation and then a question. On the valuation, I understand that it’s certainly within the realm of your current overall multiple, but relative to your growth rate of 26% last year in China versus flattish business elsewhere it seems to be a bit of a discount. And then as you move forward in China, is there anything that was coming up that made you think this was a good time to do it now? I mean you have been obviously very strong growth in China to date. I understand that you want to do an IPO, but was there any sort of hurdle you were going to approach that this deal made you more comfortable with it that you had to do with or where you felt you need to do it now? Thanks.

Richard L. Gelfond

The answer is unequivocal no, there is nothing as a matter of fact we’ve been talking with FountainVest for almost four years. So we’ve been exploring it and we wouldn’t do it unless it was the right deal for us and they wouldn’t do it unless it was the right deal for them and finally after a lot of to’s and fro’s it just happened to be done now and someone ask the similar question and I think I said we were doing it from a position of strength, which we were. So there was absolutely no catalyst for this moment versus more of what I call was a strategic catalyst that it just made sense for us over time and that’s why we’re working on it for a long time.

In terms of the valuation, as I told you, we are tough, they are tough. I wish we could have got more they wish, they could have paid less for it, but when we balanced all the factors together and we looked at what we thought were going to be the perceived long term benefits and the fact we still own 80% of it and the fact that subject to some veto rights, we still control the company and we still consolidate it, it seem like a good deal for us.

Daniel Ernst – Hudson Square Research, Inc.

Great color. Thank you.

Operator

Thank you. The next question comes from David McFadgen of Cormark Securities. Please go ahead. I’m sorry. Mr. Ben Mogil of Stifel, please go ahead.

Benjamin Mogil – Stifel Nicolaus Canada, Inc.

Hi, guys good morning and sorry if this question was answered already. I got cut off. On free cash flow, was the unit free cash flow positive last year or was it free cash flow negative, and can you give any direction around that?

Richard L. Gelfond

Yes, it was free cash flow positive last year.

Benjamin Mogil – Stifel Nicolaus Canada, Inc.

Okay, great. And so here is maybe a different question, because I know you talked about valuation from an EBITDA perspective. Is valuation on the unit on a free cash flow basis higher or lower than where the overall companies were trading out roughly speaking?

Richard L. Gelfond

As I said, I don’t think we’re really going to go into that.

Benjamin Mogil – Stifel Nicolaus Canada, Inc.

Okay, totally understandable. Thank you very much.

Operator

Thank you. The next question comes from Marla Backer, Ascendiant. Please go ahead.

Marla S. Backer – Ascendiant Capital Markets LLC

Thank you. It’s Marla Backer with Ascendiant. A couple of questions, will this have any impact on your ability or your potential interest in possibly repatriating some of the free cash flow back to IMAX the parent at a future date?

Richard L. Gelfond

As I think, I mentioned in my remarks Marla is that about half of the proceeds will come back to IMAX Canada, the parent company, and half will stay in IMAX China. In terms of repatriating the free cash flow, I mean, I think that will determine what the uses and sources are in China and we’ll make a decision on what makes the best, what makes the most sense as you know, the company is a positive operating cash flow significantly.

So and if the model keeps building out it will become more significantly positive operating cash flow. So I think, that whole question really depends on how China is doing and how the whole world is doing, and we’ll be flexible about that.

Marla S. Backer – Ascendiant Capital Markets LLC

Okay. And then in terms of marketing the IMAX brand, are you sticking to your core strategy there or will there be some slight, perhaps even subtle change and how you market the IMAX brand in China after this?

Richard L. Gelfond

We haven’t decided the answer to that yet. I don’t really see a dramatic change in the spending level. Although I do know that our partners own various media outlets that are involved in marketing of consumer brands. And that’s one area, where I think they might be helpful to us in both advising us and maybe setting up some kind of ventures to leverage it. But we had – we don’t have a definitive answer yet.

Marla S. Backer – Ascendiant Capital Markets LLC

Thank you.

Richard L. Gelfond

I think that’s the end of the Q&A. So thank you very much for joining us on such short notice, really appreciate it. To summarize, there are four keys strategic reasons why we think this transaction drive significant long-term value for IMAX, and why we think CMC and FountainVest are the right partners for us to continue our evolution in China.

Number one, it introduces Chinese ownership into the IMAX China business and important step for doing an IPO in China over the next – during the next five years. Two, it provides further integration into the Chinese business community and political community, which we believe will help maximize the growth of our theater network and our brand going forward.

Three, it adds to our breadth of our local relationships and partnerships, further strengthening our position in China. And finally, it broadens our opportunities for new business, including our previously announced expansion into the home entertainment.

On a personal note, I’ve devoted a significant amount of my career here at IMAX to opening up the Chinese market. And I did it at a time when it was unpopular about 15 years ago. And we started at the top with relationships and we continued on the bottom with relationships that we built a lot of relationships and it’s been professionally fulfilling for IMAX Corporation, and I think I have a fairly good understanding of the way, the country it works, and what the opportunities are, and what the pitfalls are.

And I gave this transaction a lot of thought over a number of years and to my mind having learned a lot over a long period of time. I think it’s very much in the interest of IMAX, and I think over time we’re going to unlock significant value. Thank you for joining the call.

Operator

Ladies and gentlemen, this does conclude the conference call for today. You may now disconnect your line and have a great day.

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