Imax Shares Fall Amid SEC Inquiry, Lack of Buyer [WSJ]
By MARK HEINZL
August 10, 2006; Page A2
TORONTO -- Imax Corp. said it couldn't find a buyer at a price sought by the company, five months after the big-screen movie company put itself up for sale.
Separately, Imax said it is the subject of an informal inquiry by the Securities and Exchange Commission over the company's revenue-recognition practices.
In March, Imax said it hired financial advisers to explore a possible sale or merger after the company received "several unsolicited inquiries."
Although Imax received "significant initial interest from multiple parties," there are "presently no buyers who have indicated a willingness to acquire the company at a valuation sought by the board of directors," Imax said in a statement. It said the company's bankers continue to explore a possible transaction, however, "because interest remains from several parties at a lower valuation."
Shares of Imax were down 22 cents, or 2%, to $9.63 in 4 p.m. composite trading on the Nasdaq Stock Market. After the company's announcement, the stock decreased to about $6.15 in after-hours trading. When Imax announced its plans for a possible sale of the company in March, shares rose about 9%. At the 4 p.m. trading price, Imax's market value was about $400 million on a fully diluted basis.
Imax reported second-quarter financial results yesterday, posting net income of $3.5 million, or eight cents a share, compared with $1.1 million, or three cents a share, a year earlier. Revenue climbed 34% to $41.4 million.
Imax said the SEC has inquired about the company's use of "multiple element arrangement accounting" when Imax sells a big-screen theater system. Imax said it books revenue associated with different segments of a theater system at different times. The company said it booked revenue in the fourth quarter of 2005 on 10 theater systems in theaters that didn't open during the quarter. In seven of those cases, revenue associated with the screen portion of the system wasn't booked until the final screen was installed, Imax said.
The company said it believes its application of the accounting policy is in accordance with generally accepted accounting principles and supported by Imax's auditors PricewaterhouseCoopers LLP. Imax said it is cooperating with the inquiry.
Imax officials said on a conference call they don't believe the revenue-recognition issue was related to the inability to sell the company at a price sought by the board. |
