Write-down sinks Imax's fourth quarter

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TORONTO -- A write-down on outdated film projection equipment led giant-screen exhibitor Imax to post widened fourth-quarter and year-end losses Friday.

Toronto-based Imax 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 Providence, R.I., theater.

Imax said it wrote down its obsolete inventory because installations slowed in 2007 as exhibitors chose to wait for the company's roll out 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 of the year.

"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 stood at $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.

Gelfond's counterpart, Bradley Wechsler, projected financial improvement in late 2008 as Imax's planned launch of its digital projection systems continue on schedule.

"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.

As of Dec. 31, Imax had 299 Imax theaters in 39 countries.
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