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By Mike Caggeso
A $4 million write-down bludgeoned fourth-quarter earnings of Canada-based IMAX Corp. (IMAX) – Canada’s large-screen film production company – which posted a net loss of $10.1 million, or 25 cents a share.
The write-down was related to old film-based equipment as the company continues its shift into digital-based technology. Excluding the write-down and a $2.5 million theater sale in Rhode Island, the company posted a loss of 21 cents per share and a 13% decline in revenue – still below analysts’ expectations, Reuters reported.
Co-Chief Executive Officers Richard Gelfond and Bradley Wechsler said last year “was a year of extraordinary progress from a strategic standpoint” and that progress made in 2007 has yet to materialize in financial results.
For example, the company signed agreements for 107 IMAX- theatre systems in the fourth quarter of fiscal 2007, compared to nine in the fourth quarter of 2006.
“We are looking forward to emerging from this transitional period and believe our roll-out of digital systems in the back half of 2008 will lay the foundation for financial improvement later this fiscal year,” Gelfond and Wechsler said in a statement.
The Big Picture
IMAX is known for its large-format, color-and-sound-enhanced films specially filmed for presentation on large screens that are usually owned by third parties.
While its financial results are trending down, the company is in a great position to profit as the motion-picture industry – like nearly every business sector – evolves into a bigger and more efficient business.
But there is one notable exception. IMAX doesn’t face much competition for its bread-and-butter business: enormous and entertaining movies drenched in digital sound.
Shares of the company’s stocks rocketed 62% on a single day in December when IMAX announced a deal that will install 100 digital projection systems in AMC Entertainment Inc. theaters across North America.
The deal doubled IMAX’s North American venues and guarantees regular airing of its films, amounting to an estimated $30 million to $35 million in additional cash flow.
Also last year, the company inked two separate development deals in China – a 10-screen deal with. [China’s fastest-expanding multiplex developer] and a five-screen deal with Hong Kong-based Lark International.
And the recent hit its stock took from fourth-quarter earnings is a great opportunity for speculative investors to get in early on IMAX if the large-screen craze takes off in the next few years.
News and Related Story Links:
- Reuters: IMAX loss widens, hit by film-equipment write-down
- IMAX Corp.:IMAX Corporation reports fourth quarter and fiscal 2007 financial results
- Money Morning: The Big Picture: IMAX Inks 100-Screen Deal and Eyes Asia Expansion