Write-down hits Imax Q4

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A write-down on outdated film projection equipment led Imax to post widened fourth-quarter and year-end losses.

The Toronto-based giant-screen exhibitor said its losses for the three months ending Dec. 31 grew from $9.2 million in 2006 to $10.1 million as it recorded a $4 million write-down on film-related equipment caused by the transition to digital projection technology.

The fourth-quarter loss was offset by a $2.5 million gain from the sale of a theater in Providence, R.I.

Imax said it wrote down its obsolete inventory because installations slowed in 2007 as exhibitors chose to wait for the company's rollout of new digital projection technology in second-half 2008.

But in a conference call with analysts Friday, Imax co-CEO Richard Gelfond dispelled the notion that his company will ink few deals in the first half.

"I don't think it's an assumption that no one wants to sign anything (in the first half)," Gelfond said. "There will be installs in the first and second quarter. Some of them … we won't be able to recognize because they'll be subject to upgrades, but others that we'll be installing will be recognized."

Fourth-quarter revenue was $32.3 million, down 13% from a year ago's $36.5 million. During the quarter, Imax signed deals for 107 theater systems, compared with just nine in fourth-quarter 2006.

That business included a deal to install 100 digital projection systems at AMC Entertainment theaters in the U.S. market. During the current quarter, Imax announced a separate deal with Racimec for 35 theaters in Latin America to be installed during the next six years.

For full-year 2007, Imax posted a loss of $26.9 million on revenue of $115.8 million, compared with a year-ago loss of $16.8 million on revenue of $127.7 million.

Co-CEO Bradley Wechsler projected financial improvement as Imax's launch of its digital projection systems continue.

"Our new model is now firmly in place, and we closed out the year having developed a digital system in faster time at a lower cost of goods sold and projected higher gross margins than originally budgeted," he said.
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