Year-end and final-quarter profits fell at Alliance Atlantis Communications in 2006, a loss that the Toronto media giant is pinning partly on its higher tax bill.

AAC — currently the subject of a takeover bid by Winnipeg’s CanWest Global Communications — saw profits of $48.6 million for the year ending Dec. 31, 2006, down from $70.9 million in 2005. Annual revenue increased to $1.2 billion in 2006, from $1 billion in 2005, according to financial results released on Tuesday.

The company lost $16.6 million in its final quarter, down from a profit of $24.8 million for the same period in 2005. AAC is pinning the losses partly on a big tax hit in 2006 — its income tax provision almost doubled from that of 2005, to $43.8 million from $28.6 million.

In a conference call, CEO Phyllis Yaffe was upbeat about 2007, saying high-definition TV and digital channels are driving audience and ad revenue growth.

‘HDTV continues to have phenomenal growth, especially in real-estate shows,’ said Yaffe, adding that Alliance expects to attract five million more subscribers to its digital channels in 2007.

AAC coproduces and distributes the hit CSI franchise, which continues to be a big income generator, said Yaffe. The company’s entertainment revenue was up in the fourth quarter by $19.1 million — 20% more than in 2005 — largely due to second-window sales and higher licence fees for the crime-show juggernaut.

The company plans to hold a special shareholders meeting about the joint takeover bid by CanWest Global and Goldman Sachs Partners on April 5, said Yaffe.

‘We’ve always known this would be possible because of our financial strength. We truly believe that the combination of CanWest and Alliance will allow us to be stronger.’ The deal is currently before the federal Competition Bureau and must also obtain approval from the CRTC.

Alliance Atlantis owns 13 specialty channels — including the Showcases, History Television and the newly relaunched Slice — and a 51% limited partnership interest in Motion Picture Distribution LP.