Panavision, Inc.

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Panavision, Inc.

founded: 1955



Contact Information:

headquarters: 6219 de soto ave.
woodland hills, ca 91367 phone: (818)316-1000 fax: (818)316-1021 url: http://www.panavision.com

OVERVIEW

Panavision, Inc. is the top designer, supplier and manufacturer of high-precision cinematography cameras, both analog and digital, used in the motion picture and television industries. In 2000, the company's equipment was used in the making of about 75 percent of all movies produced by major film studios. Panavision's equipment includes camera systems comprised of cameras, lenses, and accessories. Essentially, Panavision's innovations through the years changed the way motion pictures were made.

Throughout the years, Panavision has worked directly with producers, directors and cinematographers to design and produce systems and accessories that meet the film industry's creative needs.

Panavision's equipment is not available for sale. it can only be rented through the company's domestic and internationally owned and operated facilities and a network of independent agents. Panavision has rental offices and maintenance facilities throughout North America, Europe and the Asia Pacific region.

Panavision, which incorporated in 1990, also has rental operations that offer lighting, lighting grip, power distribution and generation, and related transportation equipment. These operations include Lee Lighting, a lighting rental company in the United Kingdom, as well as other owned and operated facilities in Chicago, Dallas, Orlando, Toronto and Australia. The company manufactures and sells lighting filters and other color-correction and diffusion filters through its Lee Filters operation. In 2000, camera rental accounted for 63 percent of Panavision's revenues, while lighting rental accounted for 20 percent.

COMPANY FINANCES

Panavision, Inc. revenue for the 12 months ending December 31, 2001 was $190.8 million, down from $204.6 million in 2000. Revenue was $202.8 million in 1999, $192.9 million in 1998, and $176.9 million in 1997.

Operating income for 2001 was $21.9 million as compared to $30.8 million in 2000. Camera rental revenue for 2001 was $124.6 million. Camera rental revenue for 2000 was $130.0 million. Revenue decreased $0.8 million, or 0.6 percent, compared to 1999.

Lighting rental revenue for 2001 was $31.7 million, a decrease of $8.6 million, or 21.3 percent, compared to 2000. The decrease was primarily due to considerably lower levels of feature film production in the U.K. Lighting rental revenue for 2000 was $40.3 million, an increase of $4.1 million, or 11.3 percent, compared to 1999.



ANALYSTS' OPINIONS

On April 4, 2002, Panavision's price hit a new 52-week low at $3.80 per share. At the time, VectorVest, a stock analysis organization, reported that Panavision had well-below-average safety with well-below-average upside potential, making it a stock which was likely to give well-below-average, inconsistent returns over the long term. The firm's estimation reflected a general consensus among many observers.



HISTORY

Panavision, Inc. was started in 1955 by Robert Gottschalk, a camera pioneer, to meet the needs of motion picture producers who wanted to make movies in a wide-screen format. The company's first product was an anamorphic projection lens, a high-quality spherical optic mounted in a housing that holds a pair of anamorphic prisms. That year, MGM studios began preproduction on the movie spectacle "Ben Hur." The studio's Chief of Research and Development, Douglas Shearer, asked Gottschalk to develop a camera process that would accommodate MGM's wide-screen plans for the epic. Wide-screen formats were still relatively new and MGM wanted to film "Ben-Hur" in the best available system. That led to the development of the anamorphic 65/70 mm process known as MGM Camera 65, or Ultra Panavision.

In 1957, Ultra Panavision was ready for use before the studio was ready to begin filming "Ben-Hur," so MGM used it on the film "Raintree County."Around the same time, the company introduced the Ultra Panatar variable anamorphic lens that could be used with either 35mm or 70mm films.

In 1959, the Ultra Panavision process was premiered with the release of "Ben-Hur." The film won a record 11 Academy Awards, including best color cinematography and a special technical Oscar, awarded to MGM and Panavision, for the development of the Camera 65 process. This success paved the way for MGM's remake of "Mutiny on the Bounty." Released in 1962, the film was the first credited as being filmed in Ultra Panavision 70. During this period, MGM sold its camera department to Panavision and rented back the cameras and lenses from Panavision for the production of the film. In the meantime, Panavision refined both the lenses and cameras, making them lighter and more portable.

In 1965, Panavision was purchased by Banner Productions, headed by Sy Weintraub, which allowed Panavision to expand geographically. Gottschalk remained president and Weintraub became chairman of the board. Until that year, the company had only been supplying Hollywood with its equipment. Gottschalk now provided Panavision equipment for rental companies all over the world.

The company changed hands again in 1968 when it was taken over by the Kinney National Service, Inc. conglomerate. Again, Gottschalk remained president. In 1971, Kinney was renamed Warner Communications, Inc. During this period, Gottschalk had an idea for a new camera and hired Albert Mayer, an engineer from Mitchell Cameras, to design a 35mm hand-held camera system that would also be silent. The project resulted in the Panaflex, which weighed under 100 pounds, enabling better location filming. "The Sugarland Express" (1973), an early Steven Speilberg film, was the first production filmed entirely with Panaflex cameras.

During the mid-1970s, Panavision developed a video camera called the Panacam, which featured Panavision lenses and an optical viewfinder. In 1976, the company developed the Panaflex Gold, an improvement over the Panaflex because of its electronic features. In the late 1970s, Panavision introduced the Panaglide, a harness enabling the camera operator to walk with the Panaflex attached in front, which eliminated the need for the dolly track. Also during that decade, Panavision introduced the Panastar, a high speed camera.

In the 1980s, the company introduced the Panaflex 16, a 16mm camera with all the features of the Panaflex. It was developed for low-budget photography, music videos and television commercials.

When Robert Gottschalk passed away in 1982, Jac Holzman assumed the chairmanship of Panavision, now a wholly-owned subsidiary of Warner Communications. By this time, Panavision was in financial trouble, but Holzman helped turn the company around. While Holzman was at the helm, Panavision introduced an advanced system of 16mm cinematography called the Platinum Panaflex, and the company began a new program of optical design resulting in the acclaimed Primo Series lenses. It also created a comprehensive management information system to track the whereabouts of rental equipment throughout the world. This proved necessary, as Panavision's reach had expanded considerably.

In 1985, Panavision was sold to a group of investors headed by John Farrand, the company's current CEO, and Ted Field, for more than $70 million. After five months, Field and Farrand bought the other investors out and Panavision started two new projects. The result was the Platinum, a new Panaflex camera, and the Primo lenses, which featured color-matching. In 1988, Panavision developed a relay optical system that combined its lenses into the one-inch image format of the Sony high definition HDC-300 camera.

In 1990, Panavision incorporated to become Panavision, Inc. In 1994, the company entered a five-year renewable licensing agreement with Lockheed Missiles and Space Company for the exclusive worldwide use of the Lockheed liquid lens technology.

Heading into the new century, Panavision joined the digital revolution. In 1999, it began collaborations with Sony to develop high definition, digital camera systems. In 2000, the two organizations formed a new company to supply Sony and Panavsion technology. In 2001, Panavision entered a partnership with EFILM, a firm that operates an advanced digital laboratory and serves the motion picture and television industries. Also, Panavision partnered with Viewpoint Digital, a leader in 3D digital modeling, to provide a solution for scanning and modeling feature film sets and locations.




STRATEGY

As stated by Panavision's president and CEO John Farrand, "Panavision's mission has always been to provide clients with the best equipment and services. Along with that, the company's goals include developing a series of extremely high-performance lenses, specifically for digital cinematography; producing a complete system of cameras, lenses, and accessories to satisfy the needs of cinematographers and directors, and to present this in a form that is both familiar and unobtrusive to their creative needs."

FAST FACTS: About Panavision, Inc.


Ownership: Panavision, Inc. is a publicly owned company traded on the New York Stock Exchange. Up until 2002, Chairman Ronald Perelman, who is also chairman of Revlon, owned 86 percent of the company.

Ticker Symbol: PVI

Officers: Ronald O. Perlman, Chmn. of the Board; John S. Farrand, CEO, Pres., and Dir., 58, 2000 salary $900,000; Scott L. Seybold, EVP and CFO, 56, 2000 salary $243,058; Barry F. Schwartz, EVP and Gen. Counsel

Employees: 1,284

Principal Subsidiary Companies: Panavision, Inc. has a network of rental offices and maintenance facilities throughout North America, Europe and the Asia Pacific region. It serves as the parent company for the following subsidiaries: Panavision UK, Panavision Australia, Panavision New Zealand, Panavasion Alga Paris, Panavision Merchandise/Expendables, and Panavision New York. The Lee Filters subsidiary makes and sells lighting, color-correction, and diffusion filters. The Lee Lighting subsidiary rents lighting equipment in the United Kingdom.

Chief Competitors: Panavision's two primary competitors are Arriflex, based in Munich, Germany, and Moviecam, based in Vienna, Austria. It is also in competition with Eastman Kodak Company, Park-erVision, Inc., and Vari-Lite International, Inc.




The company has found that renting rather than buying equipment is more cost-effective for feature film, television and commercial producers because of periods of inactivity between productions. Panavision has geared its business strategy accordingly. With Panavision's rental arrangement, producers have continual access to equipment.

Panavision cinematographic equipment includes cameras, lenses and accessories which clients rent on a project-by-project basis. The company's rental inventory includes more than 1,000 cameras, 5,000 lenses, and associated accessories. The company has designed its camera systems so clients have an integrated design with compatible products. Typical camera rental packages include a number of camera systems including a camera, lenses and accessories such as eyepieces, viewfinders, cables and brackets. Specific needs are met through equipment such as sync-sound cameras, including the Platinum Panaflex. The lighting rental operations offer a large inventory of lampheads. The company also manufactures and sells lighting filters through its Lee Filters operations in the United Kingdom and the United States. In addition, Panavision sells various consumable products such as light bulbs and gaffer tape.

Panavision's rental policy has been the strategy that has allowed the company to stay in business. The fact that the equipment remains the property of the company provides several advantages. At first, Panavision sold projection attachments and some anamorphic 35mm taking lenses. However, it soon decided to limit its operations to equipment rental. The initial reason was that the company saw that the anamorphic taking lenses were complicated and needed constant tuning and maintenance work, but the company then realized that it could drive itself out of business by selling equipment. The rental arrangement worked out best for everyone involved. A film producer could write off the cost of lenses on one production and Panavision could, during the equipment maintenance process, upgrade the equipment to clients' needs and requests.

The policy of customer engineering is one of the most significant elements of the Panavision business model. Panavision can spend a lot of money developing an improved product because it is not limited by a sales price. For example, if Panavision designs a lens to sell, the lens cannot cost more than a certain amount of money in the development and manufacturing phases. If it did cost more, the company would see no profit. On the other hand, if the lens is developed and manufactured for rental only, the company can spend as much money as it wishes on it because, over a certain period of time, the costs will be covered by rental fees and a profit will eventually be realized by continued rentals. As a result, Panavision can spend money to get the best materials to manufacture its equipment, and customers know that they are renting the best.



INFLUENCES

Profits in the motion picture industry can be influenced by any number of unforeseen and uncontrollable factors. Panavision's decreased revenue in recent years can be attributed to such factors, specifically threatened labor disruptions and threatened strikes by the Writers Guild of America and the Screen Actors Guild as well as the World Trade Center attack of 9/11, all of which contributed to a decline in production in the second half of 2001.

Panavision president and CEO John Farrand described the situation as it related to Panavision late in 2001: "As of the end of September, major studio feature film production starts on a year-to-date basis were below the levels of the first nine months of 2000. The market environment in our other two key market segments was mixed. We continue to have good results in North American series television; however, our revenue in the television commercial segment has been constrained throughout the year by a weak commercial advertising market worldwide. The features and commercial segments have also been adversely impacted by the tragic events of September 11."

CHRONOLOGY: Key Dates For Panavision, Inc.


1955:

Panavision is started by camera pioneer Robert Gottschalk

1957:

Panavision develops Ultra Panavision, which is used in the films "Raintree County" and "Ben Hur"

1959:

#x201D; Ben Hur" is released and wins 11 Academy Awards, including awards for Panavision technology

1965:

Panavision is purchased by Banner Productions

1968:

Panavision is bought by Kinney National Services, Inc.

1973:

Panavision's Panaflex is used in the film "The Sugarland Express"

1982:

Robert Gottschalk dies

1985:

Panavision is sold to a group of investors, including current CEO John Farrand

1990:

Panavision incorporates

1999:

Panavision begins collaborations with Sony




Other factors that can, and have, affected fortunes within the industry in recent years include competitive pressures resulting from changes in technology, customer requirements and industry standards, increased expenses related to new product initiatives and product development, and unfavorable foreign currency fluctuations.

Company revenues and income are affected also by factors like seasonality and market risk. In North America, Panavision points out, episodic television programs cease filming in the second quarter for several months and typically resume production in August. Feature film production activity typically reaches its peak in the third and fourth quarters. About market risk, Panavision indicates that it is exposed to risk from changes in foreign currency exchange rates and interest rates, which could affect its business, results of operations, and financial condition.



CURRENT TRENDS

Besides modifying existing products for its clients, Panavision, Inc. has been at the vanguard of industry innovation. In the past, new products that it designed and manufactured include Panaflex, the Panaglide and the Panaflex 16, all pioneering inventions that advanced the art of motion pictures.

As it heads into the future, Panavision is moving in the direction of digital technology. To do this, it has been entering into partnerships and agreements with appropriate organizations. In 2000, Sony Electronics, Inc. and Panavision, Inc. established a strategic relationship to form a new company to supply Sony's 24P CineAlta high definition video cameras with Panavision's advanced Primo Digital lenses for use in the motion pictures industry. The companies saw the partnership as a way to advance implementation of digital cinematography. The equipment was soon being used by filmmaker George Lucas for two installments of his Star Wars film series, "Episode I" and "Episode II." In 2001, Panavision further strengthened its digital strategy by entering a partnership with EFILM, a firm that operates an advanced digital laboratory that serves the motion picture and television industries.

Also, Panavision formed a strategic relationship with Viewpoint Digital, a leader in 3D digital modeling, to provide a solution for scanning and modeling feature film sets and locations. This would accelerate the adoption of set scanning with digital modeling as the fastest, most accurate way to integrate live-action photography with computer-generated imagery.

Panavision also integrated new information systems and telecommunications capabilities into its services to provide more options for its customers. In 2001, Panavision entered into an exclusive agreement with Picture PipeLine, LLC to make available Pipeline's file transfer, synchronized playback and annotation applications at Panavision locations worldwide. The service allows production crews to use broadband to transmit film footage and allow digital collaboration. Further, production personnel can drop off dailies to Panavision locations, where they are encoded in MPEG 1 or MPEG 2, encrypted at the highest level of security, and delivered electronically to another Panavision location or to another PipeLine facility. When sent to the Panavision location, the footage can then be delivered to the desired film location or the production staff can collaborate at Panavision facilities using Picture PipeLine's synchronized playback and annotation features (voice and text).



PRODUCTS

Panavision's revenue is generated by camera rental operations, lighting rental operations, and sales and other revenue. Camera equipment rentals include camera systems, lenses and accessories. Lighting rental operations include the leasing of lighting, lighting grip, transportation and distribution equipment, and mobile generators. Sales and other revenue include the manufacture and sale of lighting filters through Lee Filters in the United Kingdom and the United States; EFILM's operations, which provide high-resolution scanning of film, digital color timing, laser film recording of digital video, and high-definition images to film and digital mastering services used by the motion picture and television industries; and sales of various consumable products, such as film stock, light bulbs and gaffer tape.

"I'M READY FOR MY CLOSE-UP, MR. DEMILLE"

Before Panavision and MGM put their heads together to come up with their own wide-screen process, the rage of the movie industry was CinemaScope. However, that process featured a significant flaw. The center of the filmed image received less horizontal squeeze when lenses were focused at short distances, and that played havoc with closeups. The face of any actor caught in that portion of the frame looked distorted. This resulted in what was called the "Cinemascope Mumps." The MGM/Panavision collaboration, with its anamorphic lenses, eliminated that problem.




GLOBAL PRESENCE

Panavision, Inc. is truly an international corporation. Its main subsidiaries, located around the world, include Panavision UK, Panavision Australia, Panavision New Zealand, Panavasion Alga Paris, Panavision Merchandise/Expendables, and Panavision New York. Subsidiaries Lee Filters and Lee Lighting operate in the United Kingdom.



CORPORATE CITIZENSHIP

Panavision, Inc. often contributes its resources toward educational purposes. In recent years, it has joined Kodak in an initiative, called the Panavision/Kodak Out-reach Program, to provide university film students with free access to cameras, lenses, films, and digital technology. For several years, Kodak and Panavision have worked together in the program, which travels to four to six colleges and universities each year to conduct an extensive 16 mm hands-on camera workshop. The equipment remains at the school for the making of a faculty-nominated student film project.

Panavision is also a major supporter of F.O.C.U.S. Institute of Film, a California organization dedicated to the discovery of new film talent and the development of charitable feature film production. Proceeds go to educational and vocational scholarship funds for the under-privileged, orphaned and foster children.



EMPLOYMENT

In 2000, Panavision, Inc. had 1,284 employees. It only hires highly qualified and specialized people capable of designing and manufacturing the most complex equipment.

In the motion picture industry, its is very hard to break into various sectors and companies. In recent years, prospective candidates may have found it particularly hard to find employment at Panavision. The company's 2000 employee count only represented a less-than-one-percent growth rate (0.8) over the previous year. In 2001, Panavision undertook certain cost reduction initiatives that included reductions in headcount.




SOURCES OF INFORMATION

Bibliography

bijl, adriaan. "the importance of panavision: the diffusion phase." 70mm newsletter, march 2002. available at http://hjem.get2net.dk.

business.com. "panavision information," 11 april 2002. available at http://www.business.com.

hart, martin. "solving the mysteries of mgm camera 65 and ultra panavision 70." wide gauge film and video monthly, augdec. 1997. available at http://www.widescreenmuseum.com/widescreen/c65story.htm.

msn money.com. "pvi company report: investing," 11 april 2002. available at http://moneycentral.msn.com/investor/research/profile.asp?symbol=pvi.

wrsn.com. "company info: panavision inc.," 11 april 2002. available at http://www.wsrn.com/apps/companyinfo.

yahoo! finance. "profile: panavision, inc.," yahoo! market guide, 11 april 2002. available at http://biz.yahoo.com/p/p/pvi.html.


For an annual report:

on the internet at: http://biz.yahoo.com/e/010330/pvi.html


For additional industry research

investigate companies by their standard industrial classification codes, also known as sics. panavision's primary sic is:

3861 photographic equipment and supplies

also investigate companies by their north american industry classification system codes, also known as naics codes. panavision's primary naics code is:

333315 photographic and photocopying equipment manufacturing

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