Imax first-quarter loss increases

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TORONTO -- After restating faulty financial results for fiscal 2002-05 on Friday, giant-screen exhibitor Imax Corp. posted a widening first-quarter loss for 2007.

Toronto-based Imax said it plans to take the input of securities authorities and change the way it recognizes revenue from theater system installations.

Imax saw its loss for the quarter ending March 31 grow to $4.9 million, against a loss of $3.7 million in 2006, on revenue of $27.2 million, compared with $23.3 million a year ago.

Systems revenue was $13.1 million, compared with $12.8 million year-over-year, as Imax recognized revenue on five theater systems in first quarters 2006 and 2007.

Imax closed Friday up 10% at $4.85. It was the biggest gainer on The Hollywood Reporter's Showbiz 50 stock index.

Imax's film revenue for the latest quarter was $9.1 million, compared with $6 million in first-quarter 2006, on the strength of such recent Hollywood releases as "300" and "Spider-Man 3." The film revenue line includes revenue of $4.6 million from digitally remastering Hollywood titles, compared with DMR revenue of $1.1 million in 2006.

Theater operations revenue stood at $4.5 million, compared with $3.7 million a year ago.

Imax also released its delayed 2006 annual report after uncovering faulty accounting. The exhibitor said its 2006 loss came to $16.9 million, compared with a restated 2005 profit of $7.8 million. Revenue for 2006 came to $129.3 million, compared with $135.3 million for restated 2005.

As part of its restatements, Imax said that the way it previously recognized theater installations led it to overstate earnings for fiscal 2002-05 by $10.4 million, an amount that will now be pushed forward to fiscal 2006 and 2007.

As part of its new accounting policy for theaters, Imax will recognize an installation only when the screen and 3-D glass-cleaning machine are in place and the new theater owner and staff are fully trained and formally accept the system.

Imax previously recognized revenue when the theater projector and sound system were installed, and deferred revenue recognition for the screen, 3-D glass-cleaning machine and other deliverables into future quarters.

While expressing relief that the release of its delayed financial restatements is behind Imax, co-chairman and co-CEO Bradley Wechsler cautioned analysts during a conference call that separate accounting probes by the U.S. Securities and Exchange Commission and the Ontario Securities Commission continue.

"We still have more questions to answer. And more generally, we believe the OSC and the FCC want to understand some aspects of our business better than they do now," he said.

After posting recent losses, co-CEO Rich Gelfond told analysts that 2007 will be "somewhat of a transitional year from a financial perspective."

"While the consumer response has been overwhelming -- sold-out shows, long lines, huge per-screen grosses -- the progress has still not manifested itself in the bottom line in the way we know it can," Gelfond added.
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