Upgrades, restatements slow Imax Q3

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TORONTO -- Giant screen exhibitor Imax posted a widened third-quarter loss that it put down to the cost of doing digital business.

For the three months ending Sept. 30, Toronto-based Imax recorded a loss of $7.5 million, compared with a loss of $5.6 million in 2006.

The exhibitor's operating costs during the latest quarter were affected by higher spending on its pending transition to digital projection technology, and increased legal and accounting costs required to restate past financial results.

"As a result of high R&D (research and development) related to the digital initiative, high SG&A (selling, general and administrative expenses), largely related to accounting and regulatory issues, as well as slow film-based theater installations, 2007 continues to be a challenging year from a financial point-of-view," Imax co-CEO Bradley Wechsler told analysts during a conference call Friday.

Imax expects to start to install new digital projection technology in its theaters during second-quarter 2008.

Ahead of that launch, the large format exhibitor recorded $1.6 million in R&D costs during the latest quarter, compared with $900,000 in 2006. And it incurred $2.7 million in legal and accounting fees during the third quarter to get its filing of financial statements up to speed.

"You've seen the peak in 2007," Wechsler said when asked whether the company's digital R&D and SG&A costs will start to trend down next year.

Overall, third-quarter revenue came to $29.8 million, down from $31 million a year ago. Systems revenue was $14.9 million, compared with $17.6 million in 2006, as Imax recognized revenue on five theater systems during the latest quarter, compared with seven in 2006.

Film revenue was $9.5 million, compared with $7.7 million a year ago. During the latest quarter, Imax posted $6.2 million in revenue from digitally remastering Hollywood movies, compared with $3.4 million in 2006.

And theater operations revenue was $4.4 million, against a year-earlier $4.7 million.
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