Imax seeks new capitol, regain focus - Los Angeles Times 12/11/06

[ALIASd]

Imax seeks new capital to help in regaining focus

It needs to add theaters and develop a digital format, analysts say. High costs and an SEC probe make investors wary.

By Lorenza Muñoz
Los Angeles Times Staff Writer
December 11, 2006

Imax Corp. may be staring at a bigger mountain of problems than the climbers in "Everest," the hit documentary shown in its gargantuan-screen theaters.

Troubles for the company started earlier this year with the disclosure of an informal inquiry by the Securities and Exchange Commission into whether revenue was improperly booked.

That news caused Imax's stock to tumble so much that it now trades 70% below its 52-week high. Nine lawsuits have been filed by shareholders. And, the company has had trouble finding a buyer at a time when it needs capital to expand and upgrade to digital technology.

Long term, there's a bigger problem for the Canadian company that pioneered the showing of films on screens as tall as eight stories accompanied by 14,000-watt blasts of sound. As multiplexes convert from film to digital projection, the crystal clear images and 3D technology that once made Imax special are no longer uncommon.

"Imax has distinguished itself especially in a world that is filled with entertainment options including home theaters," said Paul Dergarabedian, head of Media by Numbers, a box office tracking firm. "However, emerging technologies will make the normal movie screen more compelling."

Imax in recent years has worked closely with Hollywood to wow moviegoers at the local multiplex with huge-screen versions of popular releases, among them "Superman Returns" and the "Harry Potter" series, both from Warner Bros.

Still, it's hard for theaters to justify the $1.5 million needed for an Imax projector, sound system and specially designed auditorium.

Because of the high costs, there are just 137 Imax screens in the United States. Only 65 are in multiplex theaters, with the rest in educational institutions, museums, zoos and even two furniture stores. Most of the company's growth is happening abroad, with 145 Imax locations in 40 countries.

"The problem is there are not enough movies, not enough screens or apparent economic benefit for theater owners," said analyst Jeffrey Logsdon of BMO Capital Markets.

For Imax, reels of its film are one of the biggest costs, an especially burdensome cost in an era of digital technology that doesn't require them. Imax's 70-millimeter prints — which run wave-like through projectors at 24 frames a second to produce razor-sharp images — cost about $22,000 each and nearly twice that, $43,000, when they are in 3D. Standard 35-millimeter prints cost just $1,200.

"To grow the company, they need to convert to a digital format," said Dan Fellman, head of distribution for Warner Bros.

full article at http://www.latimes.com/entertainment...business-enter

[ALIASd]

Imax no longer on block

Company has another setback

By Tamsen Tillson
Variety
December 18, 2006

Imax has for the second time taken itself off the block as an "acceptable" buyer has failed to materialize. The Toronto-based large-screen exhibitor put itself up for sale in March.

"While Imax received interest from multiple parties in our process of exploring a potential sale or merger of the company, none ultimately indicated a willingness to acquire the company at an acceptable valuation," said co-chairs and co-CEOs Rich Gelfond and Brad Wechsler.
News came after the markets closed Friday. Imax shares have slid from their 52-week high in mid-March of $10.85 to close Friday at $4.20.

The 39-year-old company, which has in recent years been enjoying improved fiscals and a higher profile with the unspooling of reformatted Hollywood tentpoles, hired investment banks Allen & Co. and UBS Warburg March 9. The hope was that a deep-pocketed buyer would help Imax move beyond its traditional business model of selling its projection systems to a more profitable one, a la HBO, in which it takes a share of the B.O. proceeds and can move back into production.

But instead of a white knight, the company was hit with a series of setbacks. The SEC and the Ontario Securities Commission had some questions. Chief financial officer Frank Joyce exited in August. And its share price, which had already begun a steady descent, plunged with the news in August that its ideal buyer was not forthcoming.

In its latest quarter, the company shed $12 million in red ink, and much-hyped "The Ant Bully" turned in disappointing B.O. In addition, the release of the 3-D Imax version of "Happy Feet" had to be downgraded to a 2-D release because the film was finished too late.

There's an unpleasant sense of deja vu for the company, which in 2000 put itself up for sale at the behest of its then-largest shareholder, Wasserstein Perella. Generalized woes in the exhibition industry were blamed for the subsequent freefall in the company's share price and its decision to pull itself off the block at the time.

Company brass are keeping a stiff upper lip, however, reporting plans to stay the current strategic course of international expansion -- there are 280 Imax theaters in 40 countries -- and the development of its money-saving digital projection system, skedded to roll out in 2008.

http://www.variety.com/article/VR111...goryid=13&cs=1