NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in thousands of U.S. dollars, unless otherwise stated)
(Unaudited)
IMAX Corporation, together with its consolidated subsidiaries (the Company), prepares its financial statements in
accordance with United States Generally Accepted Accounting Principles (U.S. GAAP).
The condensed
consolidated financial statements include the accounts of the Company together with its consolidated subsidiaries, except for subsidiaries which the Company has identified as variable interest entities (VIEs) where the Company is not the
primary beneficiary. The nature of the Companys business is such that the results of operations for the interim periods presented are not necessarily indicative of results to be expected for the fiscal year. In the opinion of management, the
information contained herein reflects all normal and recurring adjustments necessary to make the results of operations for the interim periods a fair statement of such operations.
The Company has evaluated its various variable interests to determine whether they are VIEs as required by the Consolidation
Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC or Codification).
The Company has 11 film production companies that are VIEs. For five of the Companys film production companies, the
Company has determined that it is the primary beneficiary of these entities as the Company has the power to direct the activities of the respective VIE that most significantly impact the respective VIEs economic performance and has the
obligation to absorb losses of the VIE that could potentially be significant to the respective VIE or the right to receive benefits from the respective VIE that could potentially be significant to the respective VIE. These consolidated production
companies have total assets of $8.4 million (December 31, 2015 $7.2 million) and total liabilities of $4.1 million as at September 30, 2016 (December 31, 2015 $4.1 million). The majority of these consolidated assets are
held by the IMAX Original Film Fund (the Film Fund) as described in note 16(b). For the other six film production companies which are VIEs, the Company did not consolidate these film entities since it does not have the power to direct
activities and does not absorb the majority of the expected losses or expected residual returns. The Company equity accounts for these entities. As at September 30, 2016, these six VIEs have total assets of $0.4 million
(December 31, 2015 $0.4 million) and total liabilities of $0.4 million (December 31, 2015 $0.4 million). Earnings of the investees included in the Companys condensed consolidated statements of
operations amounted to $nil and $nil for the three and nine months ended September 30, 2016, respectively (2015 $nil and $nil, respectively). The carrying value of these investments in VIEs that are not consolidated is $nil at
September 30, 2016 (December 31, 2015 $nil). A loss in value of an investment other than a temporary decline is recognized as a charge to the condensed consolidated statements of operations. The Companys exposure, which is
determined based on the level of funding contributed by the Company and the development stage of the respective film, is $nil at September 30, 2016 (December 31, 2015 $nil).
The Company accounts for investments in new business ventures using the guidance of the FASB ASC 323
Investments Equity Method and Joint Ventures (ASC 323) or ASC 320 Investments in Debt and Equity Securities (ASC 320), as appropriate.
All intercompany accounts and transactions, including all unrealized intercompany profits on transactions with
equity-accounted investees, have been eliminated.
The year-end condensed consolidated balance sheet data was derived from
audited financial statements, but does not include all disclosures required by U.S. GAAP.
These interim financial
statements should be read in conjunction with the consolidated financial statements included in the Companys 2015 Annual Report on Form 10-K for the year ended December 31, 2015 (the 2015 Form 10-K) which should be
consulted for a summary of the significant accounting policies utilized by the Company. These interim financial statements are prepared following accounting policies consistent with the Companys financial statements for the year ended
December 31, 2015, except as noted below.
9
2.
|
New Accounting Standards and Accounting Changes
|
Adoption of New Accounting Policies
In January 2015, the FASB issued ASU No. 2015-01, Income Statement Extraordinary and Unusual Items (Subtopic
225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (ASU 2015-01). Prior to the changes under ASU 2015-01, an entity was required to separately classify, present and disclose
extraordinary events and transactions under the disclosure requirements of Subtopic 225-20, Income Statement Extraordinary and Unusual Items (Subtopic 225-20). ASU 2015-01 eliminates from U.S. GAAP the concept of
extraordinary items therefore such separate disclosure is no longer required in the Income Statement of an entity. For public companies, the amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2015. The amendments can be applied prospectively or retrospectively. The Company prospectively adopted the amendments under ASU 2015-01 on January 1, 2016. The adoption of the standard did not have an impact on the
disclosures presented in the condensed consolidated statements of operations for the three and nine months ended September 30, 2016 and 2015, respectively.
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation
Analysis (ASU 2015-02). ASU 2015-02 changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities such as limited partnerships and similar entities, and
variable interest entities that have free arrangements and related party relationships. Furthermore, all legal entities are subject to re-evaluation under the revised consolidation model. The amendments also provide a scope exception from
consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered
money market funds. For public companies, the amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments can be applied retrospectively or using a modified
retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. The Company adopted the amendments under ASU 2015-02 retrospectively on January 1, 2016. The adoption of the
standard did not have an impact on the Companys condensed consolidated financial statements as there was no change to the entities currently consolidated by the Company.
In April 2015, the FASB issued ASU No. 2015-03, Interest Imputation of Interest (Subtopic 835-30):
Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03), and in August 2015 issued ASU No. 2015-15, Interest Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt
Issuance Costs Associated with Line-of-Credit Arrangements (ASU 2015-15). Under ASU 2015-03, debt issuance costs reported on the balance sheet will be reflected as a direct deduction from the related debt liability rather than as
an asset. While ASU 2015-03 addresses costs related to term debt, ASU
2015-15
provides clarification regarding costs to secure revolving lines of credit, which are, at the outset, not associated with an
outstanding borrowing. ASU 2015-15 provides commentary that the U.S Securities and Exchange Commission (SEC) staff would not object to an entity deferring and presenting costs associated with line-of-credit arrangements as an asset and
subsequently amortizing them ratably over the term of the revolving debt arrangement. For public companies, the amendments apply to annual periods beginning on or after December 15, 2015, and interim periods within those years and are to be
applied retrospectively. The Company adopted these standards on January 1, 2016. As at December 31, 2015, $0.4 million of unamortized debt issuance costs related to the Companys loan to finance the construction of its Playa Vista
facility were reclassified in the condensed consolidated balance sheet from Other assets to Bank indebtedness. The Company will continue to defer and present the debt issuance cost related to its senior secured revolving credit facility in Other
assets and amortize it ratably over the term of the agreement.
In March 2016, the FASB issued ASU No. 2016-09,
Compensation Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). The amendment is to simplify several aspects of the accounting for share-based payment transactions
including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, the amendments in ASU 2016-09 are effective for interim and annual reporting
periods beginning after December 15, 2016. ASU 2016-09 requires that the Company elect to account for forfeitures based on an estimate of the number of awards for which the requisite service period will not be rendered or to account for
forfeitures as they occur. The Company elected to early adopt ASU 2016-09 during the second quarter of 2016 and to account for forfeitures as they occur. The impact from the adoption of the provisions related to forfeiture rates was reflected in the
Companys condensed consolidated financial statements on a modified retrospective basis resulting in a balance sheet reclass of $4.4 million decrease to Accumulated earnings, $0.9 million increase to Deferred income taxes and $5.3 million
increase to Other equity. A recovery of
stock-based
compensation expense of $2.7 million for the nine month period ended September 30, 2016 was also recorded. Amendments related to accounting for excess
tax benefits have been adopted prospectively resulting in a tax benefit of $0.1 million for the nine months ended September 30, 2016, and amendments related to the condensed consolidated statement of cash flows have been adopted
10
retrospectively. See Notes 11 and 12 for further discussion of the impact on the Companys condensed consolidated financial statements from the adoption of ASU 2016-09.
Recently Issued FASB Accounting Standard Codification Updates
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities (ASU 2016-01). The purpose of the amendment is intended to provide users of financial statements with more useful information on the recognition, measurement, presentation,
and disclosure of financial instruments. For public entities, the amendments in ASU 2016-01 are effective for interim and annual reporting periods beginning after December 15, 2017. The Company is currently assessing the impact of ASU 2016-01
on its condensed consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases
(Topic 842) (ASU 2016-02). The purpose of the amendment is to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. New disclosures will include
qualitative and quantitative requirements to provide additional information about the amounts recorded in the financial statements. Lessor accounting will remain largely unchanged from current guidance, however ASU 2016-02 will provide improvements
that are intended to align lessor accounting with the lessee model and with updated revenue recognition guidance. For public entities, the amendments in ASU 2016-02 are effective for interim and annual reporting periods beginning after
December 15, 2018. The Company is currently assessing the impact of ASU 2016-02 on its condensed consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract
Novations on Existing Hedge Accounting Relationships (ASU 2016-05). The amendments in ASU 2016-05 apply to all reporting entities for which there is a change in the counterparty to a derivative instrument that has been designated
as a hedging instrument under Topic 815. The amendments clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815 does not, in and of itself, require de-designation of
that hedging relationship provided that all other hedge accounting criteria (including those in paragraphs 815-20-35-14 through 35-18) continue to be met. For public entities, the amendments in ASU 2016-05 are effective for interim and annual
reporting periods beginning after December 15, 2016. The Company is currently assessing the impact of ASU 2016-05 on its condensed consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-07, Investments Equity Method and Joint Ventures (Topic 323):
Simplifying the Transition to the Equity Method of Accounting (ASU 2016-07). The purpose of the amendment is to eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in
the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by step basis as if the equity method had been in effect during all previous periods
that the investment had been held. For public entities, the amendments in ASU 2016-07 are effective for interim and annual reporting periods beginning after December 15, 2016. The Company is currently assessing the impact of ASU 2016-07 on its
condensed consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-08, Revenue from
Contracts with Customers (Topic 606): Principal versus Agent Considerations (ASU 2016-08). The purpose of ASU 2016-08 is to clarify the implementation of guidance on principal versus agent considerations. For public entities, the
amendments in ASU 2016-08 are effective for interim and annual reporting periods beginning after December 15, 2017. The Company is currently assessing the impact of ASU 2016-08 on its condensed consolidated financial statements.
In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying
Performance Obligations and Licensing (ASU 2016-10). The purpose of ASU 2016-10 is to provide more detailed guidance in the following key areas: identifying performance obligations and licenses of intellectual property. For public
entities, the amendments in ASU 2016-10 are effective for interim and annual reporting periods beginning after December 15, 2017. The Company is currently assessing the impact of ASU 2016-10 on its condensed consolidated financial statements.
In May 2016, the FASB issued ASU No. 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging
(Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 pursuant to Staff announcements at the March 3, 2016 EITF Meeting (ASU 2016-11). The purpose of ASU 2016-11 is to rescind from
the FASB Accounting Standards Codification certain SEC paragraphs as a result of two SEC Staff Announcements at the March 3, 2016 meeting. For public entities, the amendments in ASU 2016-11 related to Topic 605 are effective for interim and
annual reporting periods beginning after December 15, 2017 and amendments related to Topic 815 are effective for interim and annual reporting periods beginning after December 15,
11
2015. The Company is currently assessing the impact of ASU 2016-11 related to topic 605 on its condensed consolidated financial statements.
In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 660): Narrow-Scope
Improvements and Practical Expedients (ASU 2016-12). The purpose of ASU 2016-12 is to clarify certain narrow aspects of Topic 660 such as assessing the collectibility criterion, presentation of sales taxes and other similar taxes
collected from customers, noncash consideration, contract modifications at transition, completed contracts at transition, and technical correction. For public entities, the amendments in ASU 2016-12 are effective for interim and annual reporting
periods beginning after December 15, 2017. The Company is currently assessing the impact of ASU 2016-12 on its condensed consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments (ASU 2016-13). The purpose of ASU 2016-13 is to require a financial asset measured on the amortized cost basis to be presented at the net amount expected to be collected. Credit losses
relating to available-for-sale debt securities should be recorded through an allowance for credit losses. For public entities, the amendments in ASU 2016-13 are effective for interim and annual reporting periods beginning after December 15,
2019. The Company is currently assessing the impact of ASU 2016-13 on its condensed consolidated financial statements.
In
August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). The purpose of ASU 2016-15 is to reduce the diversity in
practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. For public entities, the amendments in ASU 2016-15 are effective for interim and annual reporting periods beginning after
December 15, 2017. The Company is currently assessing the impact of ASU 2016-15 on its condensed consolidated financial statements.
Recently issued FASB accounting standard codification updates, except for the above noted standards, were not material to the
Companys condensed consolidated financial statements for the period ended September 30, 2016.
12
Financing receivables, consisting of net investment in sales-type leases and receivables from financed sales of theater systems
are as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Gross minimum lease payments receivable
|
|
$
|
11,341
|
|
|
$
|
13,998
|
|
Unearned finance income
|
|
|
(1,826
|
)
|
|
|
(2,381
|
)
|
|
|
|
|
|
|
|
|
|
Minimum lease payments receivable
|
|
|
9,515
|
|
|
|
11,617
|
|
Accumulated allowance for uncollectible amounts
|
|
|
(672
|
)
|
|
|
(672
|
)
|
|
|
|
|
|
|
|
|
|
Net investment in leases
|
|
|
8,843
|
|
|
|
10,945
|
|
|
|
|
|
|
|
|
|
|
Gross financed sales receivables
|
|
|
148,358
|
|
|
|
146,232
|
|
Unearned finance income
|
|
|
(37,661
|
)
|
|
|
(39,378
|
)
|
|
|
|
|
|
|
|
|
|
Financed sales receivables
|
|
|
110,697
|
|
|
|
106,854
|
|
Accumulated allowance for uncollectible amounts
|
|
|
(643
|
)
|
|
|
(568
|
)
|
|
|
|
|
|
|
|
|
|
Net financed sales receivables
|
|
|
110,054
|
|
|
|
106,286
|
|
|
|
|
|
|
|
|
|
|
Total financing receivables
|
|
$
|
118,897
|
|
|
$
|
117,231
|
|
|
|
|
|
|
|
|
|
|
Net financed sales receivables due within one year
|
|
$
|
21,260
|
|
|
$
|
19,068
|
|
Net financed sales receivables due after one year
|
|
$
|
88,794
|
|
|
$
|
87,218
|
|
As at September 30, 2016, the financed sale receivables had a weighted average effective
interest rate of 9.2% (December 31, 2015 9.4%).
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Raw materials
|
|
$
|
32,662
|
|
|
$
|
25,750
|
|
Work-in-process
|
|
|
4,215
|
|
|
|
2,628
|
|
Finished goods
|
|
|
14,138
|
|
|
|
10,375
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
51,015
|
|
|
$
|
38,753
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2016, finished goods inventory for which title had passed to the
customer and revenue was deferred amounted to $5.1 million (December 31, 2015 $5.4 million).
During
the three and nine months ended September 30, 2016, the Company had write-downs for excess and obsolete inventory based upon current estimates of net realizable value considering future events and conditions of a recovery of less than $0.1
million and an expense of $0.2 million, respectively (2015 recovery of $0.1 million and expense of $0.4 million, respectively).
13
5.
|
Property Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at September 30, 2016
|
|
|
|
|
|
|
Accumulated
|
|
|
Net Book
|
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Value
|
|
Equipment leased or held for use
|
|
|
|
|
|
|
|
|
|
|
|
|
Theater system components
|
|
$
|
216,670
|
|
|
$
|
86,219
|
|
|
$
|
130,451
|
|
Camera equipment
|
|
|
5,902
|
|
|
|
3,750
|
|
|
|
2,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222,572
|
|
|
|
89,969
|
|
|
|
132,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets under construction
|
|
|
14,890
|
|
|
|
|
|
|
|
14,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
8,203
|
|
|
|
|
|
|
|
8,203
|
|
Buildings
|
|
|
68,974
|
|
|
|
14,306
|
|
|
|
54,668
|
|
Office and production equipment
|
|
|
40,587
|
|
|
|
21,237
|
|
|
|
19,350
|
|
Leasehold improvements
|
|
|
7,159
|
|
|
|
2,889
|
|
|
|
4,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124,923
|
|
|
|
38,432
|
|
|
|
86,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
362,385
|
|
|
$
|
128,401
|
|
|
$
|
233,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2015
|
|
|
|
|
|
|
Accumulated
|
|
|
Net Book
|
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Value
|
|
Equipment leased or held for use
|
|
|
|
|
|
|
|
|
|
|
|
|
Theater system components
|
|
$
|
199,974
|
|
|
$
|
74,568
|
|
|
$
|
125,406
|
|
Camera equipment
|
|
|
5,393
|
|
|
|
3,368
|
|
|
|
2,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205,367
|
|
|
|
77,936
|
|
|
|
127,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets under construction
|
|
|
9,616
|
|
|
|
|
|
|
|
9,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
8,203
|
|
|
|
|
|
|
|
8,203
|
|
Buildings
|
|
|
67,150
|
|
|
|
12,679
|
|
|
|
54,471
|
|
Office and production equipment
|
|
|
34,396
|
|
|
|
17,035
|
|
|
|
17,361
|
|
Leasehold improvements
|
|
|
3,512
|
|
|
|
2,327
|
|
|
|
1,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113,261
|
|
|
|
32,041
|
|
|
|
81,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
328,244
|
|
|
$
|
109,977
|
|
|
$
|
218,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
6.
|
Other Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at September 30, 2016
|
|
|
|
|
|
|
Accumulated
|
|
|
Net Book
|
|
|
|
Cost
|
|
|
Amortization
|
|
|
Value
|
|
Patents and trademarks
|
|
$
|
11,181
|
|
|
$
|
6,928
|
|
|
$
|
4,253
|
|
Licenses and intellectual property
|
|
|
22,490
|
|
|
|
7,295
|
|
|
|
15,195
|
|
Other
|
|
|
14,023
|
|
|
|
3,866
|
|
|
|
10,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
47,694
|
|
|
$
|
18,089
|
|
|
$
|
29,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2015
|
|
|
|
|
|
|
Accumulated
|
|
|
Net Book
|
|
|
|
Cost
|
|
|
Amortization
|
|
|
Value
|
|
Patents and trademarks
|
|
$
|
10,399
|
|
|
$
|
6,502
|
|
|
$
|
3,897
|
|
Licenses and intellectual property
|
|
|
22,390
|
|
|
|
6,464
|
|
|
|
15,926
|
|
Other
|
|
|
11,878
|
|
|
|
2,751
|
|
|
|
9,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
44,667
|
|
|
$
|
15,717
|
|
|
$
|
28,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other intangible assets of $14.0 million are comprised mainly of the Companys investment
in an enterprise resource planning system. Fully amortized other intangible assets are still in use by the Company.
During the nine months ended September 30, 2016, the Company acquired $3.2 million in other intangible assets. The
weighted average amortization period for these additions was 10 years.
During the three and nine months ended
September 30, 2016, the Company incurred costs of less than $0.1 million and $0.2 million, respectively, to renew or extend the term of acquired other intangible assets which were recorded in selling, general and administrative expenses
(2015 less than $0.1 million and less than $0.1 million, respectively).
As at September 30, 2016,
estimated amortization expense for each of the years ended December 31, are as follows:
|
|
|
|
|
2016 (three months remaining)
|
|
$
|
858
|
|
2017
|
|
|
3,270
|
|
2018
|
|
|
3,270
|
|
2019
|
|
|
3,270
|
|
2020
|
|
|
3,270
|
|
15
7.
|
Credit Facility and Playa Vista Loan
|
On March 3, 2015, the Company amended and restated the terms of its existing senior secured credit facility (the
Prior Credit Facility) in order to, among other things, eliminate the fixed charge coverage ratio under the Prior Credit Facility and reset certain financial maintenance covenants. The amended and restated facility (the Credit
Facility), with a scheduled maturity of March 3, 2020, has a maximum borrowing capacity of $200.0 million, the same maximum borrowing capacity as under the Prior Credit Facility. Certain of the Companys subsidiaries serve as
guarantors (the Guarantors) of the Companys obligations under the Credit Facility. The Credit Facility is collateralized by a first priority security interest in substantially all of the present and future assets of the Company and
the Guarantors.
The terms of the Credit Facility are set forth in the Fourth Amended and Restated Credit Agreement (as
amended, the Credit Agreement), dated March 3, 2015, among the Company, the Guarantors, the lenders named therein, Wells Fargo Bank, National Association (Wells Fargo), as agent and issuing lender (Wells Fargo, together
with the lenders named therein, the Lenders) and Wells Fargo Securities, LLC, as Sole Lead Arranger and Sole Bookrunner and in various collateral and security documents entered into by the Company and the Guarantors. Each of the
Guarantors has also entered into a guarantee in respect of the Companys obligations under the Credit Facility. On February 22, 2016, the Company amended the terms of the Credit Agreement to increase the general restricted payment basket
thereunder (which covers, among other things, the repurchase of shares) from $150.0 million to $350.0 million in the aggregate after the amendment date.
The Company was in compliance with all of its requirements at September 30, 2016.
Total amounts drawn and available under the Credit Facility at September 30, 2016 were $nil and $200.0 million,
respectively (December 31, 2015 $nil and $200.0 million, respectively).
As at September 30, 2016, the Company
did not have any letters of credit and advance payment guarantees outstanding (December 31, 2015 $nil), under the Credit Facility.
Playa Vista
Financing
On October 6, 2014, IMAX PV Development Inc., a Delaware corporation (PV Borrower) and
wholly-owned subsidiary of the Company, entered into a construction loan agreement with Wells Fargo. The construction loan (the Playa Vista Construction Loan) was used to fund $22.3 million of the costs of development and construction of
the West Coast headquarters of the Company, located in the Playa Vista neighborhood of Los Angeles, California (the Playa Vista Project).
The total cost of development of the Playa Vista Project was approximately $54.0 million, with all costs in excess of the
Playa Vista Construction Loan provided through funding by the Company. The Company began occupying the Playa Vista facility in March of 2015.
On October 19, 2015, PV Borrower converted the Playa Vista Construction Loan from a construction loan into a permanent
loan (Playa Vista Loan) pursuant to the terms of the loan documents. Pursuant to the conversion, PV Borrower increased the principal balance of the loan by an additional $7.7 million, to $30.0 million. Prior to the conversion, the Playa
Vista Construction Loan bore interest at a variable interest rate per annum equal to 2.25% above the 30-day LIBOR rate, and PV Borrower was required to make monthly payments of interest only. However, as a result of the conversion, the interest rate
decreased from 2.25% to 2.0% above the 30-day LIBOR rate, and PV Borrower will be required to make monthly payments of combined principal and interest over a 10-year term with a lump sum payment at the end of year 10. The Playa Vista Loan is being
amortized over 15 years. The Playa Vista Loan will be fully due and payable on October 19, 2025 (the Maturity Date), and may be prepaid at any time without premium, but with all accrued interest and other applicable payments.
The Playa Vista Loan is secured by a deed of trust from PV Borrower in favor of Wells Fargo, granting a first lien on and
security interest in the Playa Vista property and the Playa Vista Project, including all improvements to be constructed thereon, and other documents evidencing and securing the loan (the Loan Documents). The Loan Documents include
absolute and unconditional payment and completion guarantees provided by the Company to Wells Fargo for the performance by PV Borrower of all the terms and provisions of the Playa Vista Loan and an environmental indemnity also provided by the
Company.
The Loan Documents contain affirmative, negative and financial covenants (including compliance with the
financial covenants of the Companys outstanding revolving senior secured facility with Wells Fargo), agreements, representations, warranties, borrowing conditions, and events of default customary for development projects such as the Playa
Vista Project.
16
Bank indebtedness includes the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Playa Vista Loan
|
|
$
|
28,167
|
|
|
$
|
29,667
|
|
Deferred charges on debt financing
|
|
|
(361
|
)
|
|
|
(391
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,806
|
|
|
$
|
29,276
|
|
|
|
|
|
|
|
|
|
|
Total amounts drawn under the loan at September 30, 2016 was $28.2 million (December 31,
2015 $29.7 million). The effective interest rate for the three and nine months ended September 30, 2016 was 2.51% and 2.46%, respectively (2015 2.45% and 2.44%, respectively).
In accordance with the loan agreement, the Company is obligated to make payments on the principal of the loan as follows:
|
|
|
|
|
2016 (three months remaining)
|
|
$
|
500
|
|
2017
|
|
|
2,000
|
|
2018
|
|
|
2,000
|
|
2019
|
|
|
2,000
|
|
2020
|
|
|
2,000
|
|
Thereafter
|
|
|
19,667
|
|
|
|
|
|
|
|
|
$
|
28,167
|
|
|
|
|
|
|
Wells Fargo Foreign Exchange Facility
Within the Credit Facility, the Company is able to purchase foreign currency forward contracts and/or other swap arrangements.
There is no settlement risk on its foreign currency forward contracts at September 30, 2016 as the fair value exceeded the notional value of the forward contracts. As at September 30, 2016, the Company has $26.9 million in notional value
of such arrangements outstanding.
Bank of Montreal Facility
As at September 30, 2016, the Company has available a $10.0 million facility (December 31, 2015
$10.0 million) with the Bank of Montreal for use solely in conjunction with the issuance of performance guarantees and letters of credit fully insured by Export Development Canada (the Bank of Montreal Facility). As at
September 30, 2016, the Company has letters of credit and advance payment guarantees outstanding of $0.1 million (December 31, 2015 $0.3 million) under the Bank of Montreal Facility.
17
8.
|
Contingencies and Guarantees
|
The Company is involved in lawsuits, claims, and proceedings, including those identified below, which arise in the ordinary
course of business. In accordance with the Contingencies Topic of the FASB ASC, the Company will make a provision for a liability when it is both probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The
Company believes it has adequate provisions for any such matters. The Company reviews these provisions in conjunction with any related provisions on assets related to the claims at least quarterly and adjusts these provisions to reflect the impacts
of negotiations, settlements, rulings, advice of legal counsel and other pertinent information related to the case. Should developments in any of these matters outlined below cause a change in the Companys determination as to an unfavorable
outcome and result in the need to recognize a material provision, or, should any of these matters result in a final adverse judgment or be settled for significant amounts, they could have a material adverse effect on the Companys results of
operations, cash flows, and financial position in the period or periods in which such a change in determination, settlement or judgment occurs.
The Company expenses legal costs relating to its lawsuits, claims and proceedings as incurred.
(a) On May 15, 2006, the Company initiated arbitration against Three-Dimensional Media Group, Ltd. (3DMG)
before the International Centre for Dispute Resolution in New York (the ICDR), alleging breaches of the license and consulting agreements between the Company and 3DMG. On June 15, 2006, 3DMG filed an answer denying any breaches and
asserting counterclaims that the Company breached the parties license agreement. On June 21, 2007, the ICDR unanimously denied 3DMGs Motion for Summary Judgment filed on April 11, 2007 concerning the Companys claims and
3DMGs counterclaims. The proceeding was suspended on May 4, 2009 due to failure of 3DMG to pay fees associated with the proceeding. The proceeding was further suspended on October 11, 2010 pending resolution of re-examination
proceedings involving one of 3DMGs patents. Following a status conference on April 27, 2016 before the ICDR, the ICDR granted 3DMG leave to amend its answer and counterclaims, and subsequently lifted the stay in this matter. In its
amended counterclaims, 3DMG seeks damages for alleged unpaid royalties and other fees under the license and consulting agreements. Discovery is currently ongoing and a final hearing before the ICDR has been scheduled for the week of July 10,
2017. Given the stage of discovery, the Company is unable to determine a range of potential damages in this matter. However, the Company believes that the amount of loss, if any, suffered in connection with the amended counterclaims would not have a
material impact on the financial position or results of operations of the Company, although no assurance can be given with respect to the ultimate outcome of the arbitration.
(b) In January 2004, the Company and IMAX Theatre Services Ltd., a subsidiary of the Company, commenced an arbitration seeking
damages before the International Court of Arbitration of the International Chamber of Commerce (the ICC) with respect to the breach by Electronic Media Limited (EML) of its December 2000 agreement with the Company. In June
2004, the Company commenced a related arbitration before the ICC against EMLs affiliate, E-City Entertainment (I) PVT Limited (E-City). On March 27, 2008, the arbitration panel issued a final award in favor of the Company
in the amount of $11.3 million, consisting of past and future rents owed to the Company, plus interest and costs, as well as an additional $2,512 each day in interest from October 1, 2007 until the date the award is paid. In July 2008, E-City
commenced a proceeding in Mumbai, India seeking an order that the ICC award may not be recognized in India. The Company has opposed that application on a number of grounds and seeks to have the ICC award recognized in India. On June 13, 2013,
the Bombay High Court ruled that it has jurisdiction over the proceeding but on November 19, 2013, the Supreme Court of India stayed proceedings in the High Court pending Supreme Court review of the High Courts ruling. On June 24,
2011, the Company commenced a proceeding in the Ontario Superior Court of Justice for recognition of the ICC final award. On December 2, 2011, the Ontario Court issued an order recognizing the final award and requiring E-City to pay the Company
$30,000 to cover the costs of the application. In January 2013, the Company filed an action in the New York Supreme Court seeking to collect the amount owed to the Company by certain entities and individuals affiliated with E-City. On
October 16, 2015, the New York Supreme Court denied the Companys petition, and the Company is appealing that decision. On July 29, 2014, the Company commenced a separate proceeding to have the Canadian judgment against E-City
recognized in New York, and on October 2, 2015, the New York Supreme Court granted IMAXs request, recognizing the Canadian judgment and entering it as a New York judgment. On November 26, 2014, E-City filed a motion in the Bombay
High Court seeking to enjoin IMAX from continuing the New York legal proceedings. On February 2, 2015, the Bombay High Court denied E-Citys request for an injunction. On March 16, 2015, E-City filed an appeal of this Bombay High
Court decision.
(c) In March 2013, IMAX (Shanghai) Multimedia Technology Co., Ltd., the Companys majority-owned
subsidiary in China, received notice from the Shanghai office of the General Administration of Customs that it had been selected for a customs audit. In the third quarter of 2016 IMAX (Shanghai) Multimedia Technology Co., Ltd put forth a
proposal to the Shanghai office of the General Administration of Customs in an attempt to resolve the audit issue of what costs should be subject to duties and taxes on importation into China. As a result of the proposal, the Company has accrued
$1.6 million as at September 30, 2016, of which $0.8 million is recorded in costs and expenses applicable to revenues and $0.8 million is recorded in property, plant and equipment. An additional $1.8 million will be paid to the authorities as
18
value-added tax, which local management believes is collectible in the form of future input tax credits, and therefore has been presented as a net balance of $nil in Accrued and other liabilities
as at September 30, 2016. The Company is unable to assess any other potential impact of the customs audit, if any, at this time.
(d) On November 11, 2013, Giencourt Investments, S.A. (Giencourt) initiated arbitration before the
International Centre for Dispute Resolution in Miami, Florida, based on alleged breaches by the Company of its theater agreement and related license agreement with Giencourt. Giencourt submitted its statement of claim in January 2015, the Company
submitted its statement of defense and counterclaim in April 2015 and Giencourt submitted its arbitration reply paper in September 2015. An arbitration hearing for witness testimony was held during the week of December 14, 2015. At the hearing,
Giencourts expert identified monetary damages of up to approximately $10.4 million, which Giencourt seeks to recover from the Company. The Company has asserted a counterclaim against Giencourt for breach of contract and seeks to recover lost
profits in excess of $24.0 million under the agreements. A final hearing with closing statements is scheduled for October 20 and 21, 2016. In addition, on December 10, 2015, Giencourt made a motion to the panel seeking to enforce a
purported settlement of the matter based on negotiations between Giencourt and the Company. The Company strongly disputes that discussions about a potential resolution of this matter amounted to an enforceable settlement. The panel has asked the
parties to brief this issue, and oral arguments will be held during the upcoming October hearings. Although no assurances can be given with respect to the ultimate outcome of the proceedings, the Company believes that it has meritorious defenses and
claims, and will continue to vigorously pursue them.
(e) In addition to the matters described above, the Company is
currently involved in other legal proceedings or governmental inquiries which, in the opinion of the Companys management, will not materially affect the Companys financial position or future operating results, although no assurance can
be given with respect to the ultimate outcome of any such proceedings.
(f) In the normal course of business, the Company
enters into agreements that may contain features that meet the definition of a guarantee. The Guarantees Topic of the FASB ASC defines a guarantee to be a contract (including an indemnity) that contingently requires the Company to make payments
(either in cash, financial instruments, other assets, shares of its stock or provision of services) to a third party based on (a) changes in an underlying interest rate, foreign exchange rate, equity or commodity instrument, index or other
variable, that is related to an asset, a liability or an equity security of the counterparty, (b) failure of another party to perform under an obligating agreement or (c) failure of another third party to pay its indebtedness when due.
Financial Guarantees
The Company has provided no significant financial guarantees to third parties.
Product Warranties
The following summarizes the accrual for product warranties that was recorded as part of accrued liabilities in the condensed
consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Balance at the beginning of period
|
|
$
|
|
|
|
$
|
6
|
|
Warranty redemptions
|
|
|
|
|
|
|
(6
|
)
|
Warranties issued
|
|
|
15
|
|
|
|
|
|
Revisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of period
|
|
$
|
15
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Director/Officer Indemnifications
The Companys General By-law contains an indemnification of its directors/officers, former directors/officers and persons
who have acted at its request to be a director/officer of an entity in which the Company is a shareholder or creditor, to indemnify them, to the extent permitted by the
Canada Business Corporations Act
, against expenses (including legal
fees), judgments, fines and any amounts actually and reasonably incurred by them in connection with any action, suit or proceeding in which the directors and/or officers are sued as a result of their service, if they acted honestly and in good faith
with a view to the best interests of the Company. The nature of the indemnification prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to counterparties. The Company has purchased
directors and officers liability insurance. No amount has been accrued in the condensed consolidated balance sheet as at September 30, 2016 and December 31, 2015 with respect to this indemnity.
19
Other Indemnification Agreements
In the normal course of the Companys operations, the Company provides indemnifications to counterparties in transactions
such as: theater system lease and sale agreements and the supervision of installation or servicing of the theater systems; film production, exhibition and distribution agreements; real property lease agreements; and employment agreements. These
indemnification agreements require the Company to compensate the counterparties for costs incurred as a result of litigation claims that may be suffered by the counterparty as a consequence of the transaction or the Companys breach or
non-performance under these agreements. While the terms of these indemnification agreements vary based upon the contract, they normally extend for the life of the agreements. A small number of agreements do not provide for any limit on the maximum
potential amount of indemnification; however, virtually all of the Companys system lease and sale agreements limit such maximum potential liability to the purchase price of the system. The fact that the maximum potential amount of
indemnification required by the Company is not specified in some cases prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to counterparties. Historically, the Company has not made any
significant payments under such indemnifications and no amounts have been accrued in the condensed consolidated financial statements with respect to the contingent aspect of these indemnities.
9.
|
Condensed Consolidated Statements of Operations Supplemental Information
|
The Company defers direct selling costs such as sales commissions and other amounts related to its sale and sales-type lease
arrangements until the related revenue is recognized. These costs and direct advertising and marketing, included in costs and expenses applicable to revenues-equipment and product sales, totaled $1.3 million and $3.0 million for the three and
nine months ended September 30, 2016, respectively (2015 $1.3 million and $2.8 million, respectively).
Film exploitation costs, including advertising and marketing, totaled $4.8 million and $13.8 million for the three and
nine months ended September 30, 2016, respectively (2015 $3.4 million and $8.2 million, respectively) and are recorded in costs and expenses applicable to revenues-services as incurred.
Commissions are recognized as costs and expenses applicable to revenues-rentals in the month they are earned. These costs
totaled $0.6 million and $0.9 million for the three and nine months ended September 30, 2016, respectively (2015 $0.3 million and $0.5 million, respectively). Direct advertising and marketing costs for each theater are
charged to costs and expenses applicable to revenues-rentals as incurred. These costs totaled an expense of $0.4 million and $1.0 million for the three and nine months ended September 30, 2016, respectively (2015 $0.6 million and
$1.2 million, respectively).
Included in selling, general and administrative expenses for the three and nine months ended September 30, 2016 is a loss
of $0.2 million and a loss of $0.1 million, respectively (2015 loss of $0.5 million and a loss of $1.5 million, respectively), for net foreign exchange gains/losses related to the translation of foreign currency denominated
monetary assets and liabilities. See note 15(d) for additional information.
|
(c)
|
Collaborative Arrangements
|
Joint Revenue Sharing Arrangements
In a joint revenue sharing arrangement, the Company receives a portion of a theaters box-office and concession revenues,
and in some cases a small upfront or initial payment, in exchange for placing a theater system at the theater operators venue. Under joint revenue sharing arrangements, the customer has the ability and the right to operate the hardware
components or direct others to operate them in a manner determined by the customer. The Companys joint revenue sharing arrangements are typically non-cancellable for 10 years or longer with renewal provisions. Title to equipment under joint
revenue sharing arrangements generally does not transfer to the customer. The Companys joint revenue sharing arrangements do not contain a guarantee of residual value at the end of the term. The customer is required to pay for executory costs
such as insurance and taxes and is required to pay the Company for maintenance and extended warranty throughout the term. The customer is responsible for obtaining insurance coverage for the theater systems commencing on the date specified in the
arrangements shipping terms and ending on the date the theater systems are delivered back to the Company.
20
The Company has signed joint revenue sharing agreements with 49 exhibitors
for a total of 981 theater systems, of which 592 theaters were operating as at September 30, 2016, the terms of which are similar in nature, rights and obligations. The accounting policy for the Companys joint revenue sharing
arrangements is disclosed in note 2(m) of the Companys 2015 Form 10-K.
Amounts attributable to
transactions arising between the Company and its customers under joint revenue sharing arrangements are included in Equipment and Product Sales and Rentals revenue and for the three and nine months ended September 30, 2016 amounted to
$19.7 million and $66.9 million, respectively (2015 $19.8 million and $67.3 million, respectively).
IMAX DMR
In an IMAX DMR arrangement, the Company transforms conventional motion pictures into the Companys large screen
format, allowing the release of Hollywood content to the global IMAX theater network. In a typical IMAX DMR film arrangement, the Company will absorb its costs for the digital re-mastering and then recoup this cost from a percentage of the net
box-office receipts of the film, which in recent years has ranged from 10-15%. The Company does not typically hold distribution rights or the copyright to these films.
For the nine months ended September 30, 2016, the majority of IMAX DMR revenue was earned from the exhibition of 48 IMAX
DMR films (2015 48) throughout the IMAX theater network. The accounting policy for the Companys IMAX DMR arrangements is disclosed in note 2(m) of the Companys 2015 Form 10-K.
Amounts attributable to transactions arising between the Company and its customers under IMAX DMR arrangements are included in
Services revenue and for the three and nine months ended September 30, 2016 amounted to $21.6 million and $78.8 million, respectively (2015 $20.9 million and $75.1 million, respectively).
Co-Produced Film Arrangements
In certain film arrangements, the Company co-produces a film with a third party whereby the third party retains the copyright
and rights to the film and the Company obtains exclusive theatrical distribution rights to the film. Under these arrangements, both parties contribute funding to the Companys wholly-owned production company for the production of the film and
for associated exploitation costs. Clauses in the film arrangements generally provide for the third party to take over the production of the film if the cost of the production exceeds its approved budget or if it appears as though the film will not
be delivered on a timely basis.
The accounting policies relating to co-produced film arrangements are disclosed in
notes 2(a) and 2(m) of the Companys 2015 Form 10-K.
As at September 30, 2016, the Company has one
significant co-produced film arrangement which represents the VIE total assets balance of $0.4 million and total liabilities balance of $0.4 million and five other co-produced film arrangements, the terms of which are similar.
For the three and nine months ended September 30, 2016, amounts totaling $0.5 million and $1.0 million, respectively
(2015 $0.3 million and $1.4 million, respectively) attributable to transactions between the Company and other parties involved in the production of the films have been included in cost and expenses applicable to revenues-services.
21
10.
|
Condensed Consolidated Statements of Cash Flows Supplemental Information
|
(a) Changes in other non-cash operating assets and liabilities are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
Decrease (increase) in:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
6,571
|
|
|
$
|
(12,048
|
)
|
Financing receivables
|
|
|
(1,145
|
)
|
|
|
(9,932
|
)
|
Inventories
|
|
|
(12,508
|
)
|
|
|
(18,904
|
)
|
Prepaid expenses
|
|
|
(5,105
|
)
|
|
|
(2,159
|
)
|
Commissions and other deferred selling expenses
|
|
|
285
|
|
|
|
(206
|
)
|
Insurance recoveries
|
|
|
132
|
|
|
|
28
|
|
Other assets
|
|
|
(1,299
|
)
|
|
|
(2,388
|
)
|
Increase (decrease) in:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(6,616
|
)
|
|
|
4,212
|
|
Accrued and other liabilities
|
|
|
(1,991
|
)
|
|
|
(17,528
|
)
|
Deferred revenue
|
|
|
(7,828
|
)
|
|
|
17,892
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(29,504
|
)
|
|
$
|
(41,033
|
)
|
|
|
|
|
|
|
|
|
|
(b) Cash payments made on account of:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
Income taxes
|
|
$
|
20,822
|
|
|
$
|
21,542
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
541
|
|
|
$
|
302
|
|
|
|
|
|
|
|
|
|
|
(c) Depreciation and amortization are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
Film assets
|
|
$
|
11,842
|
|
|
$
|
11,917
|
|
Property, plant and equipment
|
|
|
|
|
|
|
|
|
Joint revenue sharing arrangements
|
|
|
11,581
|
|
|
|
10,043
|
|
Other property, plant and equipment
|
|
|
7,355
|
|
|
|
5,635
|
|
Other intangible assets
|
|
|
2,368
|
|
|
|
2,354
|
|
Other assets
|
|
|
631
|
|
|
|
579
|
|
Deferred financing costs
|
|
|
402
|
|
|
|
663
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
34,179
|
|
|
$
|
31,191
|
|
|
|
|
|
|
|
|
|
|
22
(d) Write-downs, net of recoveries, are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
Accounts receivable
|
|
$
|
556
|
|
|
$
|
709
|
|
Financing receivables
|
|
|
75
|
|
|
|
|
|
Inventories
|
|
|
246
|
|
|
|
405
|
|
Film assets
|
|
|
1,000
|
|
|
|
|
|
Property, plant and equipment
|
|
|
792
|
|
|
|
1,464
|
|
Impairment of investments
|
|
|
194
|
|
|
|
350
|
|
Other intangible assets
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,903
|
|
|
$
|
2,928
|
|
|
|
|
|
|
|
|
|
|
The Companys effective tax rate differs from the statutory tax rate and varies from year to year primarily as a result of
permanent differences, investment and other tax credits, the provision for income taxes at different rates in foreign and other provincial jurisdictions, enacted statutory tax rate increases or reductions in the year, changes due to foreign
exchange, changes in the Companys valuation allowance based on the Companys recoverability assessments of deferred tax assets, and favorable or unfavorable resolution of various tax examinations. During the quarter ended
September 30, 2016, there was no change in the Companys estimates of the recoverability of its deferred tax assets based on an analysis of both positive and negative evidence including projected future earnings.
As at September 30, 2016, the Company had net deferred income tax assets after valuation allowance of $26.2 million
(December 31, 2015 $26.7 million), which consists of a gross deferred income tax asset of $26.5 million (December 31, 2015 $27.0 million), against which the Company is carrying a $0.3 million valuation allowance
(December 31, 2015 $0.3 million).
ASU 2016-09, related to stock-based compensation, was issued in March
2016 and early adopted by the Company in June 2016. ASU 2016-09 eliminates additional paid in capital (APIC) pools and requires excess tax benefits and tax deficiencies to be recorded in the condensed consolidated statements of
operations when the awards vest or are settled. Amendments related to accounting for excess tax benefits have been adopted prospectively resulting in a tax benefit of $nil and $0.1 million for the three and nine months ended September 30, 2016,
respectively. In addition, modified retrospective adoption of ASC 2016-09 eliminates the requirement that excess tax benefits be realized before they can be recognized. The Company has also recorded a cumulative-effect adjustment of $0.9 million to
Accumulated earnings and Deferred income taxes related to the impact from adoption of the provisions related to forfeiture rates. See Notes 2 and 12 for further discussion of the impact from the adoption of ASU 2016-09.
|
(b)
|
Income Tax Effect on Other Comprehensive (Loss) Income
|
The income tax (expense) benefit included in the Companys other comprehensive (loss) income are related to the following
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Unrealized change in cash flow hedging instruments
|
|
$
|
76
|
|
|
$
|
606
|
|
|
$
|
(485
|
)
|
|
$
|
1,309
|
|
Realized change in cash flow hedging instruments upon settlement
|
|
|
(149
|
)
|
|
|
(274
|
)
|
|
|
(667
|
)
|
|
|
(577
|
)
|
Amortization of actuarial loss on postretirement benefit plan
|
|
|
(4
|
)
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
226
|
|
|
|
|
|
|
|
264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(77
|
)
|
|
$
|
558
|
|
|
$
|
(1,166
|
)
|
|
$
|
996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
(a)
|
Stock-Based Compensation
|
The compensation costs recorded in the condensed consolidated statements of operations for the Companys stock-based
compensation plans were $7.7 million and $22.5 million for the three and nine months ended September 30, 2016, respectively (2015 $4.3 million and $14.9 million, respectively).
As at September 30, 2016, the Company has reserved a total of 12,467,960 (December 31, 2015 7,023,258) common
shares for future issuance under the Companys Stock Option Plan (SOP) and the IMAX Corporation Amended and Restated Long-Term Incentive Plan (IMAX LTIP). Of the common shares reserved for issuance, there are options in
respect of 5,473,673 common shares and restricted share units (RSUs) in respect of 1,140,138 common shares outstanding at September 30, 2016. At September 30, 2016, options in respect of 3,924,432 common shares were vested and
exercisable.
Stock Option Plan
The Company recorded an expense of $3.4 million and $9.4 million for the three and nine months ended September 30,
2016, respectively (2015 $2.3 million and $8.4 million, respectively) related to stock option grants issued to employees and directors in the IMAX LTIP and SOP plans. An income tax benefit is recorded in the condensed consolidated
statements of operations of $0.9 million and $2.4 million for the three and nine months ended September 30, 2016, respectively (2015 $0.5 million and $1.8 million, respectively), for these costs.
The weighted average fair value of all stock options granted to employees and directors for the three and nine months ended
September 30, 2016 at the grant date was $7.80 and $8.16 per share, respectively (2015 n/a and $8.07 per share, respectively). The following assumptions were used to estimate the average fair value of the stock options:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
Nine Months
|
|
|
Ended September 30,
|
|
Ended September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Average risk-free interest rate
|
|
1.44%
|
|
n/a
|
|
1.67%
|
|
1.97%
|
Expected option life (in years)
|
|
4.44 - 4.88
|
|
n/a
|
|
4.44 - 5.24
|
|
3.55 - 5.76
|
Expected volatility
|
|
30%
|
|
n/a
|
|
30%
|
|
30%
|
Dividend yield
|
|
0%
|
|
n/a
|
|
0%
|
|
0%
|
Stock options to Non-Employees
There were no common share options issued to non-employees during the three and nine months ended September 30, 2016 and
2015.
As at September 30, 2016, non-employee stock options outstanding amounted to 28,750 stock options (2015
39,500) with a weighted average exercise price of $26.90 per share (2015 $26.78 per share). 26,950 stock options (2015 21,525) were exercisable with an average weighted exercise price of $26.97 per share (2015
$26.34 per share) and the vested stock options have an aggregate intrinsic value of $0.1 million (2015 $0.2 million).
For the three and nine months ended September 30, 2016, the Company recorded an expense of less than $0.1 million and a
recovery less than $0.1 million, respectively (2015 expense of less than $0.1 million and $0.1 million, respectively) to cost and expenses related to revenues services and selling, general and administrative expenses related to
the non-employee stock options. Included in accrued liabilities is an accrual of less than $0.1 million for non-employee stock options (December 31, 2015 less than $0.1 million).
China Long Term Incentive Plan (China LTIP)
The China LTIP was adopted by IMAX China Holding, Inc. (IMAX China), a subsidiary of the Company, in October 2012.
Each stock option (China Option), RSU or cash settled share-based payment (CSSBP) issued under the China LTIP represents an opportunity to participate economically in the future growth and value creation of IMAX China. Prior
to the initial public offering of
24
IMAX China on October 8, 2015 (the IMAX China IPO), the China Options and CSSBPs issued by IMAX China operated in tandem with options granted to certain employees of IMAX China
under the Companys SOP and the IMAX LTIP (Tandem Options).
During 2015, no Tandem Options were granted
in conjunction with China Options or CSSBPs. Immediately prior to the IMAX China IPO, there were 186,446 outstanding and unvested Tandem Options issued under the Companys SOP and IMAX LTIP with a weighted average exercise price of $23.70 per
share. The Tandem Options had a maximum contractual life of 7 years. The total fair value of the Tandem Options granted with respect to the China LTIP was $1.9 million. The Company was recognizing this expense over a 5 year period.
Pursuant to their terms, upon the occurrence of a qualified initial public offering or upon a change in control on or prior to
the fifth anniversary of the grant date, the 186,446 Tandem Options issued would forfeit immediately and the related charge would be reversed. As a result of the IMAX China IPO on October 8, 2015, the 186,446 Tandem Options with an average
price of $23.70 per share were forfeited immediately. The Company recorded a recovery of $0.6 million in 2015 related to the forfeiture of Tandem Options issued under the Companys SOP and IMAX LTIP. During the three and nine months ended
September 30, 2015, the Company recorded an expense of $0.1 million and $0.3 million, respectively, related to the Tandem Options.
The Company subsequently recognized an immediate charge related to the vesting of China Options and certain CSSBPs for China
employees. The total fair value of the China Options and CSSBP awards granted with respect to the China LTIP was $3.9 million and $2.1 million, respectively. During the fourth quarter of 2015, a charge of $2.1 million and $1.4 million was recorded
relating to the China Options and CSSBPs, respectively. The remaining charge will be recognized over the related requisite period. The CSSBPs represent the right to receive cash payments in an amount equal to a certain percentage of the excess of
the total equity value of IMAX China based on the per share price in the IMAX China IPO over the strike price of the CSSBPs. The CSSBPs were issued in conjunction with the China LTIP, with similar terms and conditions as the China Options. The CSSBP
awards are accounted as liability awards, however the fair value of the liability is fixed at the time of the initial public offering. During the fourth quarter of 2015, a portion of the CSSBPs vested and were settled in cash for $1.0 million.
In connection with the IMAX China IPO and in accordance with the China LTIP, IMAX China adopted a post-IPO share option plan
and a post-IPO restricted stock unit plan. Pursuant to these plans, IMAX China issued additional China Options and China LTIP Restricted Share Units (China RSUs) during the nine months ended September 30, 2016. No additional China
Options and China RSUs were issued for the three months ended September 30, 2016.
During the three and nine months
ended September 30, 2016, the Company recorded an expense related to the China Options, China RSUs and CSSBPs of $0.2 million and $0.7 million, $0.1 million and $0.4 million and $0.1 million and $0.3 million, respectively. The liability
recognized with respect to the CSSBPs as at September 30, 2016 was $0.7 million (December 31, 2015 $0.4 million).
Stock Option Summary
The following table summarizes certain information in respect of option activity under the SOP and IMAX LTIP for the
nine month periods ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Exercise
|
|
|
|
Number of Shares
|
|
|
Price Per Share
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Options outstanding, beginning of period
|
|
|
4,805,244
|
|
|
|
5,925,660
|
|
|
$
|
27.03
|
|
|
$
|
24.24
|
|
Granted
|
|
|
984,452
|
|
|
|
871,431
|
|
|
|
31.49
|
|
|
|
31.56
|
|
Exercised
|
|
|
(268,516
|
)
|
|
|
(1,231,964
|
)
|
|
|
20.54
|
|
|
|
19.35
|
|
Forfeited
|
|
|
(45,024
|
)
|
|
|
(45,474
|
)
|
|
|
28.03
|
|
|
|
28.26
|
|
Cancelled
|
|
|
(2,483
|
)
|
|
|
|
|
|
|
33.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, end of period
|
|
|
5,473,673
|
|
|
|
5,519,653
|
|
|
|
28.14
|
|
|
|
26.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable, end of period
|
|
|
3,924,432
|
|
|
|
3,195,836
|
|
|
|
27.34
|
|
|
|
25.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
The Company cancelled 2,483 stock options from its IMAX LTIP surrendered by a
Company employee during the three and nine months ended September 30, 2016, respectively (2015 nil and nil, respectively). No stock options were cancelled from its SOP surrendered by Company employees during the three and nine months
ended September 30, 2016 and 2015.
As at September 30, 2016, options that are exercisable have an intrinsic
value of $9.7 million and a weighted average remaining contractual life of 3.9 years. The intrinsic value of options exercised in the three and nine months ended September 30, 2016 was $0.5 million and $3.2 million, respectively
(2015 $1.2 million and $21.4 million, respectively).
Restricted Share Units
RSUs have been granted to employees, consultants and directors under the IMAX LTIP. Each RSU represents a contingent right to
receive one common share and is the economic equivalent of one common share. The grant date fair value of each RSU is equal to the share price of the Companys stock at the grant date. The Company recorded an expense of $3.9 million and $11.6
million for the three and nine months ended September 30, 2016, respectively (2015 $1.9 million and $6.2 million, respectively), related to RSU grants issued to employees and directors in the plan. In addition, the Company recorded
an expense of $nil and $nil for the three and nine months ended September 30, 2016, respectively (2015 less than $0.1 million and less than $0.1 million, respectively), related to RSU grants issued to certain advisors and strategic
partners of the Company.
During the three and nine months ended September 30, 2016, in connection with the vesting
of RSUs, the Company settled 27,416 and 271,032, respectively (2015 32,345 and 192,077, respectively) common shares to IMAX LTIP participants, of which 21,871 and 50,167, respectively (2015 nil and 21,709, respectively) common shares,
net of shares withheld for tax withholdings of 5,328 and 8,836, respectively (2015 5,763 and 5,981, respectively) were issued from treasury and 217 and 212,029, respectively (2015 26,582 and 164,387, respectively) common shares were
settled through the open market purchases by the IMAX LTIP trustee.
Total stock-based compensation expense related to
non-vested RSUs not yet recognized at September 30, 2016 and the weighted average period over which the awards are expected to be recognized is $26.8 million and 2.4 years, respectively (2015 $16.4 million and 3.0 years,
respectively). The Companys actual tax benefits realized for the tax deductions related to the vesting of RSUs was $0.3 million and $2.6 million for the three and nine months ended September 30, 2016, respectively (2015 $0.4
million and $2.0 million, respectively).
Historically, RSUs granted under the IMAX LTIP have vested between immediately
and four years from the grant date. In connection with the amendment and restatement of the IMAX LTIP at the Companys annual and special meeting of shareholders on June 6, 2016, the IMAX LTIP plan was amended to impose a minimum
one-year vesting period on future RSU grants, with a carve-out for 300,000 RSUs that may vest on a shorter schedule. Vesting of the RSUs is subject to continued employment or service with the Company.
The following table summarizes certain information in respect of RSU activity under the IMAX LTIP for the nine months ended
September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Awards
|
|
|
Weighted Average Grant Date
Fair Value Per Share
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
RSUs outstanding, beginning of period
|
|
|
973,637
|
|
|
|
595,834
|
|
|
$
|
32.27
|
|
|
$
|
27.13
|
|
Granted
|
|
|
465,968
|
|
|
|
337,557
|
|
|
|
31.70
|
|
|
|
34.39
|
|
Vested and settled
|
|
|
(271,032
|
)
|
|
|
(192,077
|
)
|
|
|
29.30
|
|
|
|
28.93
|
|
Forfeited
|
|
|
(28,435
|
)
|
|
|
(19,499
|
)
|
|
|
30.78
|
|
|
|
29.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs outstanding, end of period
|
|
|
1,140,138
|
|
|
|
721,815
|
|
|
|
32.78
|
|
|
|
29.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at September 30, 2016, the IMAX LTIP trustee held 176 shares purchased for less than
$0.1 million in the open market to be issued upon the settlement of RSUs. The shares held with the trustee are recorded at cost and are reported as a reduction against capital stock on the condensed consolidated balance sheet.
26
Issuer Purchases of Equity Securities
On June 16, 2014, the Companys board of directors approved a new $150.0 million share repurchase program for shares
of the Companys common stock, which program was amended on April 20, 2016 to increase the aggregate purchase allowance to $200.0 million. Purchases under the program commenced during the third quarter of 2014, and the program expires on
June 30, 2017. The repurchases may be made either in the open market or through private transactions, subject to market conditions, applicable legal requirements and other relevant factors. The Company has no obligation to repurchase
shares and the share repurchase program may be suspended or discontinued by the Company at any time.
During the three and
nine months ended September 30, 2016, the Company repurchased 500,000 and 3,290,512 common shares, respectively (2015 1,000,000 and 1,000,000 common shares, respectively), at an average price of $29.32 and $30.48 per share,
respectively (2015 $34.25 and $34.25 per share, respectively). The retired shares were purchased for $14.7 million and $100.4 million, respectively (2015 $34.3 million and $34.3 million, respectively). The average carrying
value of the stock retired was deducted from common stock and the remaining excess over the average carrying value of stock was charged to accumulated deficit.
The total number of shares purchased during the three and nine months ended September 30, 2016 does not include any
shares purchased in the administration of employee share-based compensation plans (which amounted to nil and 249,657 common shares, respectively, at an average price of $nil and $33.55 per share, respectively).
Canadian Securities Law Matters
The Company has received an exemption decision issued by the Ontario Securities Commission, dated April 1, 2016, for
relief from the formal issuer bid requirements under Canadian securities laws. The exemption decision permits the Company to repurchase up to 10% of its outstanding common shares in any twelve-month period through the facilities of the New York
Stock Exchange (NYSE) under repurchase programs that the Company may implement from time to time. The Canadian securities laws regulate an issuers ability to make repurchases of its own securities.
The Company sought the exemption so that it can make repurchases under its repurchase programs in excess of the maximum
allowable in reliance on the existing other published markets exemption from the formal issuer bid requirements available under Canadian securities laws. The other published markets exemption caps the Companys ability
to repurchase its securities through the facilities of the NYSE at 5% of the issuers outstanding securities during any 12-month period.
The conditions of the exemption decision are as follows: (i) any repurchases made in reliance on the exemption decision
must be permitted under, and part of repurchase programs established and conducted in accordance with, U.S. securities laws and NYSE rules, (ii) the aggregate number of common shares acquired in reliance on the exemption decision by the Company
and any person or company acting jointly or in concert with the Company within any 12 months does not exceed 10% of the outstanding common shares at the beginning of the 12-month period, (iii) the common shares are not listed and posted for
trading on an exchange in Canada, (iv) the exemption decision applies only to the acquisition of common shares by the Company within 36 months of the date of the decision, and (v) prior to purchasing common shares in reliance on the
exemption decision, the Company discloses the terms of the exemption decision and the conditions applicable thereto in a press release that is issued on SEDAR and includes such language as part of the news release required to be issued in accordance
with the other published markets exemption in respect of any repurchase program that may be implemented by the Company.
Impact of
Stock-based Compensation Accounting Standard Update
ASU 2016-09, related to stock-based compensation, was issued in
March 2016 and early adopted in June 2016. ASU 2016-09 eliminates the requirement to estimate and apply a forfeiture rate to reduce stock compensation expense during the vesting period and, instead, account for forfeitures as they occur. ASU 2016-09
requires that this change be adopted using the modified retrospective approach. The impact from the adoption of the provisions related to forfeiture rates was reflected on a modified retrospective basis resulting in a balance sheet reclass of $4.4
million decrease to Accumulated earnings, $0.9 million increase to Deferred income taxes and $5.3 million increase to Other equity. An increase in APIC and a reduction in stock-based compensation expense of $2.7 million for the nine month period
ended September 30, 2016 was also recorded. Additionally, ASU 2016-09 addresses the presentation of excess tax benefits and employee taxes paid on the condensed consolidated statement of cash flows. The Company is required to present excess tax
benefits as an operating activity on the condensed consolidated statement of cash flows, which is where the Company previously classified these items. ASU 2016-09 also requires the presentation of employee taxes as a financing activity on the
condensed consolidated statement of cash flows. This change was reflected in the condensed consolidated statement of cash flows retrospectively. See Notes 2 and 11 for further discussion of the impact from the adoption of ASU 2016-09.
27
Reconciliations of the numerator and denominator of the basic and diluted per-share computations are comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
Ended September 30,
|
|
|
Ended September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Net income attributable to common shareholders
|
|
$
|
2,525
|
|
|
$
|
8,610
|
|
|
$
|
19,843
|
|
|
$
|
33,351
|
|
Less: Accretion charges associated with redeemable common stock
|
|
|
|
|
|
|
(263
|
)
|
|
|
|
|
|
|
(747
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common shareholders
|
|
$
|
2,525
|
|
|
$
|
8,347
|
|
|
$
|
19,843
|
|
|
$
|
32,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares (000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued and outstanding, beginning of period
|
|
|
67,067
|
|
|
|
70,152
|
|
|
|
69,673
|
|
|
|
68,988
|
|
Weighted average number of shares issued (repurchased) during the period
|
|
|
23
|
|
|
|
(453
|
)
|
|
|
(1,620
|
)
|
|
|
594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in computing basic income per share
|
|
|
67,090
|
|
|
|
69,699
|
|
|
|
68,053
|
|
|
|
69,582
|
|
Assumed exercise of stock options and RSUs, net of shares assumed repurchased
|
|
|
656
|
|
|
|
1,161
|
|
|
|
668
|
|
|
|
1,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in computing diluted income per share
|
|
|
67,746
|
|
|
|
70,860
|
|
|
|
68,721
|
|
|
|
71,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The calculation of diluted earnings per share excludes 2,570,983 and 2,834,896 shares,
respectively that are issuable upon the vesting of 19,530 and 283,443 RSUs, respectively and the exercise of 2,551,453 and 2,551,453 stock options, respectively for the three and nine months ended September 30, 2016, as the impact would be
antidilutive. The calculation of diluted earnings per share excludes 1,473,950 and 1,067,859 shares, respectively that are issuable upon the vesting of nil and 61,534 RSUs, respectively and the exercise of 1,473,950 and 1,006,325 stock options,
respectively for the three and nine months ended September 30, 2015, as the impact would be antidilutive.
As part of
the adoption of ASU 2016-09, the excess tax benefit is no longer included in the calculation of diluted shares under the treasury stock method. This has been applied prospectively.
28
|
(c)
|
Shareholders Equity Attributable to Common Shareholders
|
The following summarizes the movement of Shareholders Equity attributable to common shareholders for the nine months
ended September 30, 2016:
|
|
|
|
|
Balance as at December 31, 2015
|
|
$
|
624,791
|
|
Net income attributable to common shareholders
|
|
|
19,843
|
|
Adjustments to capital stock:
|
|
|
|
|
Cash received from the issuance of common shares
|
|
|
5,514
|
|
Issuance of common shares for vested RSUs
|
|
|
1,121
|
|
Fair value of stock options exercised at the grant date
|
|
|
2,104
|
|
Average carrying value of repurchased and retired common shares
|
|
|
(21,220
|
)
|
Share held in treasury
|
|
|
(6
|
)
|
Adjustments to other equity:
|
|
|
|
|
Employee stock options granted
|
|
|
10,092
|
|
Non-employee stock options granted and vested
|
|
|
30
|
|
Fair value of stock options exercised at the grant date
|
|
|
(2,104
|
)
|
RSUs granted
|
|
|
12,242
|
|
RSUs vested
|
|
|
(8,793
|
)
|
Stock exercised from treasury shares
|
|
|
(1,216
|
)
|
Cash received from the issuance of common shares in excess of par value
|
|
|
1,682
|
|
Adjustments to accumulated deficit:
|
|
|
|
|
Common shares repurchased and retired
|
|
|
(79,158
|
)
|
Adjustments to accumulated other comprehensive loss:
|
|
|
|
|
Unrealized net gain from cash flow hedging instruments
|
|
|
1,865
|
|
Realization of cash flow hedging net loss upon settlement
|
|
|
2,565
|
|
Foreign currency translation adjustments
|
|
|
(434
|
)
|
Amortization of actuarial loss on postretirement benefit plan
|
|
|
51
|
|
Tax effect of movement in other comprehensive income
|
|
|
(1,166
|
)
|
|
|
|
|
|
Balance as at September 30, 2016
|
|
$
|
567,803
|
|
|
|
|
|
|
29
13.
|
Segmented Information
|
The Company has seven reportable segments identified by category of product sold or service provided: IMAX systems; theater
system maintenance; joint revenue sharing arrangements; film production and IMAX DMR; film distribution; film post-production; and other. The IMAX systems segment includes the design, manufacture, sale or lease of IMAX theater projection system
equipment. The theater system maintenance segment includes the maintenance of IMAX theater projection system equipment in the IMAX theater network. The joint revenue sharing arrangements segment includes the provision of IMAX theater projection
system equipment to an exhibitor in exchange for a share of the box-office and concession revenues. The film production and IMAX DMR segment includes the production of films and the performance of film re-mastering services. The film distribution
segment includes the distribution of films for which the Company has distribution rights. The film post-production segment provides film post-production and film print services. The Company refers to all theaters using the IMAX theater system as
IMAX theaters. The other segment includes certain IMAX theaters that the Company owns and operates, camera rentals and other miscellaneous items. The accounting policies of the segments are the same as those described in note 2 to the
audited consolidated financial statements included in the Companys 2015 Form 10-K.
Management, including the
Companys Chief Executive Officer (CEO) who is the Companys Chief Operating Decision Maker (as defined in the Segment Reporting Topic of the FASB ASC), assesses segment performance based on segment revenues, gross margins and
film performance. Selling, general and administrative expenses, research and development costs, amortization of intangibles, receivables provisions (recoveries), write-downs net of recoveries, interest income, interest expense and tax (provision)
recovery are not allocated to the segments.
Transactions between the film production and IMAX DMR segment and the film
post-production segment are valued at exchange value. Inter-segment profits are eliminated upon consolidation, as well as for the disclosures below.
Transactions among the other segments are not significant.
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Revenue
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IMAX theater systems
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IMAX systems
|
|
$
|
25,687
|
|
|
$
|
30,153
|
|
|
$
|
70,508
|
|
|
$
|
64,632
|
|
Theater system maintenance
|
|
|
10,293
|
|
|
|
9,337
|
|
|
|
30,031
|
|
|
|
27,345
|
|
Joint revenue sharing arrangements
|
|
|
19,698
|
|
|
|
19,797
|
|
|
|
66,940
|
|
|
|
67,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,678
|
|
|
|
59,287
|
|
|
|
167,479
|
|
|
|
159,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Films
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production and IMAX DMR
|
|
|
21,549
|
|
|
|
20,865
|
|
|
|
78,767
|
|
|
|
75,144
|
|
Distribution
|
|
|
2,092
|
|
|
|
967
|
|
|
|
3,345
|
|
|
|
3,513
|
|
Post-production
|
|
|
2,327
|
|
|
|
761
|
|
|
|
6,436
|
|
|
|
5,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,968
|
|
|
|
22,593
|
|
|
|
88,548
|
|
|
|
83,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
4,904
|
|
|
|
3,221
|
|
|
|
14,394
|
|
|
|
11,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
86,550
|
|
|
$
|
85,101
|
|
|
$
|
270,421
|
|
|
$
|
254,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IMAX theater systems
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IMAX systems
(2)
|
|
$
|
16,743
|
|
|
$
|
13,109
|
|
|
$
|
38,252
|
|
|
$
|
34,831
|
|
Theater system maintenance
|
|
|
3,398
|
|
|
|
3,521
|
|
|
|
10,207
|
|
|
|
9,891
|
|
Joint revenue sharing
arrangements
(2)
|
|
|
10,980
|
|
|
|
12,130
|
|
|
|
44,716
|
|
|
|
46,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,121
|
|
|
|
28,760
|
|
|
|
93,175
|
|
|
|
91,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Films
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production and IMAX DMR
(2)
|
|
|
12,448
|
|
|
|
13,929
|
|
|
|
52,398
|
|
|
|
55,642
|
|
Distribution
(2)
|
|
|
258
|
|
|
|
15
|
|
|
|
(998
|
)
|
|
|
(201
|
)
|
Post-production
|
|
|
1,003
|
|
|
|
(48
|
)
|
|
|
3,028
|
|
|
|
847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,709
|
|
|
|
13,896
|
|
|
|
54,428
|
|
|
|
56,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
69
|
|
|
|
(267
|
)
|
|
|
(251
|
)
|
|
|
(421
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
44,899
|
|
|
$
|
42,389
|
|
|
$
|
147,352
|
|
|
$
|
147,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Companys largest customer represented 11.2% and 14.3% of total revenues for the three and nine
months ended September 30, 2016, respectively (2015 17.6% and 17.4%, respectively).
|
(2)
|
IMAX systems include marketing and commission costs of $0.8 million and $1.9 million for the three and
nine months ended September 30, 2016, respectively (2015 $0.9 million and $1.8 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $1.4 million and $2.9
million for the three and nine months ended September 30, 2016, respectively (2015 $1.3 million and $2.7 million, respectively). Production and DMR segment margins include marketing costs of $4.2 million and $11.7 million for
the three and nine months ended September 30, 2016, respectively (2015 $3.4 million and $8.3 million, respectively). Distribution segment margins include marketing expense of $0.6 million and $2.1 million for the three and nine
months ended September 30, 2016, respectively (2015 cost recovery of less than $0.1 million and cost recovery of $0.1 million, respectively).
|
31
Geographic Information
Revenue by geographic area is based on the location of the customer. Revenue related to IMAX DMR is presented based upon the
geographic location of the theaters that exhibit the re-mastered films. IMAX DMR revenue is generated through contractual relationships with studios and other third parties and these may not be in the same geographical location as the theater.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
28,139
|
|
|
$
|
27,914
|
|
|
$
|
96,276
|
|
|
$
|
95,945
|
|
Canada
|
|
|
2,368
|
|
|
|
3,412
|
|
|
|
9,992
|
|
|
|
8,440
|
|
Greater China
|
|
|
29,736
|
|
|
|
27,513
|
|
|
|
84,797
|
|
|
|
71,427
|
|
Asia (excluding Greater China)
|
|
|
10,665
|
|
|
|
11,007
|
|
|
|
25,034
|
|
|
|
26,732
|
|
Western Europe
|
|
|
6,140
|
|
|
|
7,100
|
|
|
|
26,522
|
|
|
|
24,139
|
|
Russia & the CIS
|
|
|
2,397
|
|
|
|
1,705
|
|
|
|
7,684
|
|
|
|
9,510
|
|
Latin America
|
|
|
1,408
|
|
|
|
2,459
|
|
|
|
8,562
|
|
|
|
7,849
|
|
Rest of the World
|
|
|
5,697
|
|
|
|
3,991
|
|
|
|
11,554
|
|
|
|
10,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
86,550
|
|
|
$
|
85,101
|
|
|
$
|
270,421
|
|
|
$
|
254,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No single country in the Rest of the World, Western Europe, Latin America and Asia (excluding
Greater China) classifications comprises more than 10% of the total revenue.
32
14.
|
Employees Pension and Postretirement Benefits
|
The Company has an unfunded U.S. defined benefit pension plan (the SERP) covering Richard L. Gelfond, CEO of
the Company.
The following table provides disclosure of the pension obligation for the SERP:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Projected benefit obligation:
|
|
|
|
|
|
|
|
|
Obligation, beginning of period
|
|
$
|
19,478
|
|
|
$
|
19,405
|
|
Interest cost
|
|
|
196
|
|
|
|
253
|
|
Actuarial gain
|
|
|
|
|
|
|
(180
|
)
|
|
|
|
|
|
|
|
|
|
Obligation, end of period and unfunded status
|
|
$
|
19,674
|
|
|
$
|
19,478
|
|
|
|
|
|
|
|
|
|
|
The following table provides disclosure of pension expense for the SERP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Interest cost
|
|
$
|
65
|
|
|
$
|
63
|
|
|
$
|
196
|
|
|
$
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension expense
|
|
$
|
65
|
|
|
$
|
63
|
|
|
$
|
196
|
|
|
$
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No contributions are expected to be made for the SERP during the remainder of 2016. The
Company expects interest costs of $0.1 million to be recognized as a component of net periodic benefit cost during the remainder of 2016.
The accumulated benefit obligation for the SERP was $19.7 million at September 30, 2016 (December 31, 2015
$19.5 million).
The following benefit payments are expected to be made as per the current SERP assumptions and the
terms of the SERP in each of the next 5 years, and in the aggregate:
|
|
|
|
|
2016 (three months remaining)
|
|
$
|
|
|
2017
|
|
|
19,871
|
|
2018
|
|
|
|
|
2019
|
|
|
|
|
2020
|
|
|
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,871
|
|
|
|
|
|
|
The SERP assumptions are that Mr. Gelfond will receive a lump sum payment six months
after retirement at the end of the current term of his employment agreement (December 31, 2016), although Mr. Gelfond has not informed the Company that he intends to retire at that time, and is currently in discussions regarding an extension of
his employment agreement with the Company.
|
(b)
|
Defined Contribution Pension Plan
|
The Company also maintains defined contribution plans for its employees, including its executive officers. The Company makes
contributions to these plans on behalf of employees in an amount up to 5% of their base salary subject to certain prescribed maximums. During the three and nine months ended September 30, 2016, the Company contributed and expensed an aggregate
of $0.3 million and $0.9 million, respectively (2015 $0.2 million and $0.8 million, respectively) to its Canadian defined contribution plan and an aggregate of $0.1 million and $0.5 million, respectively (2015
$0.2 million and $0.4 million, respectively) to its defined contribution employee plan under Section 401(k) of the U.S. Internal Revenue Code.
33
|
(c)
|
Postretirement Benefits - Executives
|
The Company has an unfunded postretirement plan for Mr. Gelfond and Bradley J. Wechsler, Chairman of the Companys
Board of Directors. The plan provides that the Company will maintain health benefits for Messrs. Gelfond and Wechsler until they become eligible for Medicare and, thereafter, the Company will provide Medicare supplement coverage as selected by
Messrs. Gelfond and Wechsler. The postretirement benefits obligation as at September 30, 2016 is $0.8 million (December 31, 2015 $0.8 million). The Company has expensed less than $0.1 million and less than $0.1
million for the three and nine months ended September 30, 2016, respectively (2015 less than $0.1 million and less than $0.1 million, respectively).
The following benefit payments are expected to be made as per the current plan assumptions in each of the next 5 years:
|
|
|
|
|
2016 (three months remaining)
|
|
$
|
34
|
|
2017
|
|
|
54
|
|
2018
|
|
|
60
|
|
2019
|
|
|
66
|
|
2020
|
|
|
33
|
|
Thereafter
|
|
|
539
|
|
|
|
|
|
|
Total
|
|
$
|
786
|
|
|
|
|
|
|
|
(d)
|
Postretirement Benefits Canadian Employees
|
The Company has an unfunded postretirement plan for its Canadian employees upon meeting specific eligibility requirements. The
Company will provide eligible participants, upon retirement, with health and welfare benefits. The postretirement benefits obligation as at September 30, 2016 is $1.9 million (December 31, 2015 $1.8 million). The Company has
expensed less than $0.1 million and less than $0.1 million for the three and nine months ended September 30, 2016, respectively (2015 less than $0.1 million and $0.1 million, respectively).
The following benefit payments are expected to be made as per the current plan assumptions in each of the next 5 years:
|
|
|
|
|
2016 (three months remaining)
|
|
$
|
96
|
|
2017
|
|
|
100
|
|
2018
|
|
|
108
|
|
2019
|
|
|
115
|
|
2020
|
|
|
117
|
|
Thereafter
|
|
|
1,330
|
|
|
|
|
|
|
Total
|
|
$
|
1,866
|
|
|
|
|
|
|
34
15.
|
Financial Instruments
|
|
(a)
|
Financial Instruments
|
The Company maintains cash with various major financial institutions. The Companys cash is invested with highly rated
financial institutions.
The Companys accounts receivables and financing receivables are subject to credit risk. The
Companys accounts receivable and financing receivables are concentrated with the theater exhibition industry and film entertainment industry. To minimize the Companys credit risk, the Company retains title to underlying theater systems
leased, performs initial and ongoing credit evaluations of its customers and makes ongoing provisions for its estimate of potentially uncollectible amounts. The Company believes it has adequately provided for related exposures surrounding
receivables and contractual commitments.
|
(b)
|
Fair Value Measurements
|
The carrying values of the Companys cash and cash equivalents, accounts receivable, accounts payable and accrued
liabilities due within one year approximate fair values due to the short-term maturity of these instruments. The Companys other financial instruments are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at September 30, 2016
|
|
|
As at December 31, 2015
|
|
|
|
Carrying
|
|
|
Estimated
|
|
|
Carrying
|
|
|
Estimated
|
|
|
|
Amount
|
|
|
Fair Value
|
|
|
Amount
|
|
|
Fair Value
|
|
Cash and cash equivalents
|
|
$
|
218,104
|
|
|
$
|
218,104
|
|
|
$
|
317,449
|
|
|
$
|
317,449
|
|
Net financed sales receivable
|
|
$
|
110,054
|
|
|
$
|
110,260
|
|
|
$
|
106,286
|
|
|
$
|
108,184
|
|
Net investment in sales-type leases
|
|
$
|
8,843
|
|
|
$
|
9,142
|
|
|
$
|
10,945
|
|
|
$
|
11,154
|
|
Available-for-sale investment
|
|
$
|
1,000
|
|
|
$
|
1,012
|
|
|
$
|
1,000
|
|
|
$
|
997
|
|
Convertible loan receivable
|
|
$
|
1,000
|
|
|
$
|
1,000
|
|
|
$
|
|
|
|
$
|
|
|
Foreign exchange contracts designated forwards
|
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
(4,423
|
)
|
|
$
|
(4,423
|
)
|
Borrowings under the Playa Vista Loan
|
|
$
|
(28,167
|
)
|
|
$
|
(28,167
|
)
|
|
$
|
(29,667
|
)
|
|
$
|
(29,667
|
)
|
Cash and cash equivalents are comprised of cash and interest-bearing investments with original
maturity dates of 90 days or less. Cash and cash equivalents are recorded at cost, which approximates fair value (Level 1 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy) as at September 30, 2016
and December 31, 2015, respectively.
The estimated fair values of the net financed sales receivable and net
investment in sales-type leases are estimated based on discounting future cash flows at currently available interest rates with comparable terms (Level 2 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy)
as at September 30, 2016 and December 31, 2015, respectively.
The fair value of the Companys
available-for-sale investment is determined using quoted prices in active markets (Level 2 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy) as at September 30, 2016 and December 31, 2015, respectively.
The fair value of the Companys convertible loan receivable approximates market value as at September 30, 2016,
as the loan was issued in the last month of the quarter (Level 2 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy).
The fair value of foreign currency derivatives is determined using quoted prices in active markets (Level 2 input in
accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy) as at September 30, 2016 and December 31, 2015, respectively. These identical instruments are traded on a closed exchange.
The carrying value of borrowings under the Playa Vista Loan approximates fair value as the interest rates offered under the
Playa Vista Loan are close to September 30, 2016 market rates for the Company for debt of the same remaining maturities (Level 2 input in accordance with the Fair Value Measurements Topic of the FASB ASC hierarchy) as at September 30,
2016.
35
There were no significant transfers between Level 1 and Level 2 during the nine
months ended September 30, 2016 or 2015. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement.
There were no transfers in or out of the Companys level 3 assets during the nine months ended September 30, 2016.
|
(c)
|
Financing Receivables
|
The Companys net investment in leases and its net financed sale receivables are subject to the disclosure requirements of
ASC 310 Receivables. Due to differing risk profiles of its net investment in leases and its net financed sales receivables, the Company views its net investment in leases and its net financed sale receivables as separate classes of
financing receivables. The Company does not aggregate financing receivables to assess impairment.
The Company monitors
the credit quality of each customer on a frequent basis through collections and aging analyses. The Company also holds meetings monthly in order to identify credit concerns and whether a change in credit quality classification is required for the
customer. A customer may improve in their credit quality classification once a substantial payment is made on overdue balances or the customer has agreed to a payment plan with the Company and payments have commenced in accordance to the payment
plan. The change in credit quality indicator is dependent upon management approval.
The Company classifies its customers
into four categories to indicate the credit quality worthiness of its financing receivables for internal purposes only:
Good standing Theater continues to be in good standing with the Company as the clients payments and reporting are
up-to-date.
Credit Watch Theater operator has begun to demonstrate a delay in payments, and has been placed on the
Companys credit watch list for continued monitoring, but active communication continues with the Company. Depending on the size of outstanding balance, length of time in arrears and other factors, transactions may need to be approved by
management. These financing receivables are considered to be in better condition than those receivables related to theaters in the Pre-approved transactions category, but not in as good of condition as those receivables in Good
standing.
Pre-approved transactions only Theater operator is demonstrating a delay in payments with little
or no communication with the Company. All service or shipments to the theater must be reviewed and approved by management. These financing receivables are considered to be in better condition than those receivables related to theaters in the
All transactions suspended category, but not in as good of condition as those receivables in Credit Watch. Depending on the individual facts and circumstances of each customer, finance income recognition may be suspended if
management believes the receivable to be impaired.
All transactions suspended Theater is severely delinquent,
non-responsive or not negotiating in good faith with the Company. Once a theater is classified as All transactions suspended the theater is placed on nonaccrual status and all revenue recognitions related to the theater are stopped.
36
The following table discloses the recorded investment in financing receivables by
credit quality indicator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at September 30, 2016
|
|
|
As at December 31, 2015
|
|
|
|
Minimum
|
|
|
Financed
|
|
|
|
|
|
Minimum
|
|
|
Financed
|
|
|
|
|
|
|
Lease
|
|
|
Sales
|
|
|
|
|
|
Lease
|
|
|
Sales
|
|
|
|
|
|
|
Payments
|
|
|
Receivables
|
|
|
Total
|
|
|
Payments
|
|
|
Receivables
|
|
|
Total
|
|
In good standing
|
|
$
|
7,974
|
|
|
$
|
108,375
|
|
|
$
|
116,349
|
|
|
$
|
10,252
|
|
|
$
|
105,352
|
|
|
$
|
115,604
|
|
Pre-approved transactions
|
|
|
|
|
|
|
1,387
|
|
|
|
1,387
|
|
|
|
|
|
|
|
757
|
|
|
|
757
|
|
Transactions suspended
|
|
|
1,541
|
|
|
|
935
|
|
|
|
2,476
|
|
|
|
1,365
|
|
|
|
745
|
|
|
|
2,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,515
|
|
|
$
|
110,697
|
|
|
$
|
120,212
|
|
|
$
|
11,617
|
|
|
$
|
106,854
|
|
|
$
|
118,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
While recognition of finance income is suspended, payments received by a customer are applied
against the outstanding balance owed. If payments are sufficient to cover any unreserved receivables, a recovery of provision taken on the billed amount, if applicable, is recorded to the extent of the residual cash received. Once the collectibility
issues are resolved and the customer has returned to being in good standing, the Company will resume recognition of finance income.
The Companys investment in financing receivables on nonaccrual status is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at September 30, 2016
|
|
|
As at December 31, 2015
|
|
|
|
Recorded
|
|
|
Related
|
|
|
Recorded
|
|
|
Related
|
|
|
|
Investment
|
|
|
Allowance
|
|
|
Investment
|
|
|
Allowance
|
|
Net investment in leases
|
|
$
|
1,541
|
|
|
$
|
(672
|
)
|
|
$
|
1,365
|
|
|
$
|
(672
|
)
|
Net financed sales receivables
|
|
|
935
|
|
|
|
(643
|
)
|
|
|
745
|
|
|
|
(568
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,476
|
|
|
$
|
(1,315
|
)
|
|
$
|
2,110
|
|
|
$
|
(1,240
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company considers financing receivables with aging between 60-89 days as indications of
theaters with potential collection concerns. The Company will begin to focus its review on these financing receivables and increase its discussions internally and with the theater regarding payment status. Once a theaters aging exceeds 90
days, the Companys policy is to review and assess collectibility on the theaters past due accounts. Over 90 days past due is used by the Company as an indicator of potential impairment as invoices up to 90 days outstanding could be
considered reasonable due to the time required for dispute resolution or for the provision of further information or supporting documentation to the customer.
37
The Companys aged financing receivables are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
|
|
|
|
|
|
|
|
|
Recorded
|
|
|
|
Accrued
|
|
|
|
|
|
|
|
|
Billed
|
|
|
Unbilled
|
|
|
Total
|
|
|
|
|
|
Investment
|
|
|
|
and
|
|
|
|
|
|
|
|
|
Financing
|
|
|
Recorded
|
|
|
Recorded
|
|
|
Related
|
|
|
Net of
|
|
|
|
Current
|
|
|
30-89 Days
|
|
|
90+ Days
|
|
|
Receivables
|
|
|
Investment
|
|
|
Investment
|
|
|
Allowances
|
|
|
Allowances
|
|
Net investment in leases
|
|
$
|
84
|
|
|
$
|
81
|
|
|
$
|
771
|
|
|
$
|
936
|
|
|
$
|
8,579
|
|
|
$
|
9,515
|
|
|
$
|
(672
|
)
|
|
$
|
8,843
|
|
Net financed sales receivables
|
|
|
2,038
|
|
|
|
883
|
|
|
|
2,489
|
|
|
|
5,410
|
|
|
|
105,287
|
|
|
|
110,697
|
|
|
|
(643
|
)
|
|
|
110,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,122
|
|
|
$
|
964
|
|
|
$
|
3,260
|
|
|
$
|
6,346
|
|
|
$
|
113,866
|
|
|
$
|
120,212
|
|
|
$
|
(1,315
|
)
|
|
$
|
118,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
|
|
|
|
|
|
|
|
|
Recorded
|
|
|
|
Accrued
|
|
|
|
|
|
|
|
|
Billed
|
|
|
Unbilled
|
|
|
Total
|
|
|
|
|
|
Investment
|
|
|
|
and
|
|
|
|
|
|
|
|
|
Financing
|
|
|
Recorded
|
|
|
Recorded
|
|
|
Related
|
|
|
Net of
|
|
|
|
Current
|
|
|
30-89 Days
|
|
|
90+ Days
|
|
|
Receivables
|
|
|
Investment
|
|
|
Investment
|
|
|
Allowances
|
|
|
Allowances
|
|
Net investment in leases
|
|
$
|
840
|
|
|
$
|
177
|
|
|
$
|
446
|
|
|
$
|
1,463
|
|
|
$
|
10,154
|
|
|
$
|
11,617
|
|
|
$
|
(672
|
)
|
|
$
|
10,945
|
|
Net financed sales receivables
|
|
|
908
|
|
|
|
1,013
|
|
|
|
1,177
|
|
|
|
3,098
|
|
|
|
103,756
|
|
|
|
106,854
|
|
|
|
(568
|
)
|
|
|
106,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,748
|
|
|
$
|
1,190
|
|
|
$
|
1,623
|
|
|
$
|
4,561
|
|
|
$
|
113,910
|
|
|
$
|
118,471
|
|
|
$
|
(1,240
|
)
|
|
$
|
117,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys recorded investment in past due financing receivables for which the Company
continues to accrue finance income is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
|
|
|
|
|
|
Recorded
|
|
|
|
Accrued
|
|
|
|
|
|
|
|
|
Billed
|
|
|
Unbilled
|
|
|
|
|
|
Investment
|
|
|
|
and
|
|
|
|
|
|
|
|
|
Financing
|
|
|
Recorded
|
|
|
Related
|
|
|
Past Due
|
|
|
|
Current
|
|
|
30-89 Days
|
|
|
90+ Days
|
|
|
Receivables
|
|
|
Investment
|
|
|
Allowance
|
|
|
and Accruing
|
|
Net investment in leases
|
|
$
|
12
|
|
|
$
|
53
|
|
|
$
|
315
|
|
|
$
|
380
|
|
|
$
|
2,424
|
|
|
$
|
|
|
|
$
|
2,804
|
|
Net financed sales receivables
|
|
|
546
|
|
|
|
522
|
|
|
|
2,463
|
|
|
|
3,531
|
|
|
|
23,103
|
|
|
|
|
|
|
|
26,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
558
|
|
|
$
|
575
|
|
|
$
|
2,778
|
|
|
$
|
3,911
|
|
|
$
|
25,527
|
|
|
$
|
|
|
|
$
|
29,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
|
|
|
|
|
|
Recorded
|
|
|
|
Accrued
|
|
|
|
|
|
|
|
|
Billed
|
|
|
Unbilled
|
|
|
|
|
|
Investment
|
|
|
|
and
|
|
|
|
|
|
|
|
|
Financing
|
|
|
Recorded
|
|
|
Related
|
|
|
Past Due
|
|
|
|
Current
|
|
|
30-89 Days
|
|
|
90+ Days
|
|
|
Receivables
|
|
|
Investment
|
|
|
Allowance
|
|
|
and Accruing
|
|
Net investment in leases
|
|
$
|
41
|
|
|
$
|
47
|
|
|
$
|
205
|
|
|
$
|
293
|
|
|
$
|
1,076
|
|
|
$
|
|
|
|
$
|
1,369
|
|
Net financed sales receivables
|
|
|
129
|
|
|
|
224
|
|
|
|
839
|
|
|
|
1,192
|
|
|
|
10,795
|
|
|
|
|
|
|
|
11,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
170
|
|
|
$
|
271
|
|
|
$
|
1,044
|
|
|
$
|
1,485
|
|
|
$
|
11,871
|
|
|
$
|
|
|
|
$
|
13,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company considers financing receivables to be impaired when it believes it to be probable
that it will not recover the full amount of principal or interest owing under the arrangement. The Company uses its knowledge of the industry and economic trends, as well as its prior experiences to determine the amount recoverable for impaired
financing receivables. The following table discloses information regarding the Companys impaired financing receivables:
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Unpaid
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
|
|
Investment
|
|
|
Principal
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
Recorded investment for which there is a related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financed sales receivables
|
|
$
|
748
|
|
|
$
|
269
|
|
|
$
|
(643
|
)
|
|
$
|
748
|
|
|
$
|
|
|
|
|
|
|
|
|
Recorded investment for which there is no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financed sales receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recorded investment in impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financed sales receivables
|
|
$
|
748
|
|
|
$
|
269
|
|
|
$
|
(643
|
)
|
|
$
|
748
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Unpaid
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
|
|
Investment
|
|
|
Principal
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
Recorded investment for which there is a related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financed sales receivables
|
|
$
|
525
|
|
|
$
|
53
|
|
|
$
|
(494
|
)
|
|
$
|
525
|
|
|
$
|
|
|
|
|
|
|
|
|
Recorded investment for which there is no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financed sales receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recorded investment in impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financed sales receivables
|
|
$
|
525
|
|
|
$
|
53
|
|
|
$
|
(494
|
)
|
|
$
|
525
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Unpaid
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
|
|
Investment
|
|
|
Principal
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
Recorded investment for which there is a related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financed sales receivables
|
|
$
|
748
|
|
|
$
|
269
|
|
|
$
|
(643
|
)
|
|
$
|
674
|
|
|
$
|
|
|
|
|
|
|
|
|
Recorded investment for which there is no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financed sales receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recorded investment in impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financed sales receivables
|
|
$
|
748
|
|
|
$
|
269
|
|
|
$
|
(643
|
)
|
|
$
|
674
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Interest
|
|
|
|
Recorded
|
|
|
Unpaid
|
|
|
Related
|
|
|
Recorded
|
|
|
Income
|
|
|
|
Investment
|
|
|
Principal
|
|
|
Allowance
|
|
|
Investment
|
|
|
Recognized
|
|
Recorded investment for which there is a related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financed sales receivables
|
|
$
|
525
|
|
|
$
|
53
|
|
|
$
|
(494
|
)
|
|
$
|
525
|
|
|
$
|
|
|
|
|
|
|
|
|
Recorded investment for which there is no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financed sales receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recorded investment in impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net financed sales receivables
|
|
$
|
525
|
|
|
$
|
53
|
|
|
$
|
(494
|
)
|
|
$
|
525
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
The Companys activity in the allowance for credit losses for the period and
the Companys recorded investment in financing receivables are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2016
|
|
|
Nine Months Ended September 30, 2016
|
|
|
|
Net Investment
|
|
|
Net Financed
|
|
|
Net Investment
|
|
|
Net Financed
|
|
|
|
in Leases
|
|
|
Sales Receivables
|
|
|
in Leases
|
|
|
Sales Receivables
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
672
|
|
|
$
|
643
|
|
|
$
|
672
|
|
|
$
|
568
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
672
|
|
|
$
|
643
|
|
|
$
|
672
|
|
|
$
|
643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
672
|
|
|
$
|
643
|
|
|
$
|
672
|
|
|
$
|
643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
9,515
|
|
|
$
|
110,697
|
|
|
$
|
9,515
|
|
|
$
|
110,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2015
|
|
|
Nine Months Ended September 30, 2015
|
|
|
|
Net Investment
|
|
|
Net Financed
|
|
|
Net Investment
|
|
|
Net Financed
|
|
|
|
in Leases
|
|
|
Sales Receivables
|
|
|
in Leases
|
|
|
Sales Receivables
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
972
|
|
|
$
|
494
|
|
|
$
|
972
|
|
|
$
|
494
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
972
|
|
|
$
|
494
|
|
|
$
|
972
|
|
|
$
|
494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
972
|
|
|
$
|
494
|
|
|
$
|
972
|
|
|
$
|
494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance: individually evaluated for impairment
|
|
$
|
12,032
|
|
|
$
|
103,418
|
|
|
$
|
12,032
|
|
|
$
|
103,418
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
|
(d)
|
Foreign Exchange Risk Management
|
The Company is exposed to market risk from changes in foreign currency rates. A majority portion of the Companys revenues
is denominated in U.S. dollars while a substantial portion of its costs and expenses is denominated in Canadian dollars. A portion of the net U.S. dollar cash flows of the Company is periodically converted to Canadian dollars to fund Canadian dollar
expenses through the spot market. In China and Japan the Company has ongoing operating expenses related to its operations in Chinese Renminbi and Japanese yen, respectively. Net cash flows are converted to and from U.S. dollars through the spot
market. The Company also has cash receipts under leases denominated in Chinese Renminbi, Japanese yen, Canadian dollars and Euros which are converted to U.S. dollars through the spot market. The Companys policy is to not use any financial
instruments for trading or other speculative purposes.
The Company entered into a series of foreign currency forward
contracts to manage the Companys risks associated with the volatility of foreign currencies. Certain of these foreign currency forward contracts met the criteria required for hedge accounting under the Derivatives and Hedging Topic of the
FASB ASC at inception, and continue to meet hedge effectiveness tests at September 30, 2016 (the Foreign Currency Hedges), with settlement dates throughout 2016 and 2017. Foreign currency derivatives are recognized and measured
in the balance sheet at fair value. Changes in the fair value (gains or losses) are recognized in the condensed consolidated statements of operations except for derivatives designated and qualifying as foreign currency hedging instruments. For
foreign currency hedging instruments, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported in other comprehensive income and reclassified to the condensed consolidated statements of operations when the
forecasted transaction occurs. Any ineffective portion is recognized immediately in the condensed consolidated statements of operations. The Company currently does not hold any derivatives which are not designated as hedging instruments and
therefore no gain or loss pertaining to an ineffective portion has been recognized.
The following tabular disclosures
reflect the impact that derivative instruments and hedging activities have on the Companys condensed consolidated financial statements:
Notional value of foreign exchange contracts:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
Foreign exchange contracts Forwards
|
|
$
|
26,869
|
|
|
$
|
30,710
|
|
|
|
|
|
|
|
|
|
|
Fair value of derivatives in foreign exchange contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
Balance Sheet Location
|
|
2016
|
|
|
2015
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts Forwards
|
|
Other assets
|
|
$
|
734
|
|
|
$
|
|
|
|
|
Accrued and other liabilities
|
|
|
(727
|
)
|
|
|
(4,423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7
|
|
|
$
|
(4,423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
41
Derivatives in Foreign Currency Hedging relationships for the nine months ended
September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Foreign exchange contracts Forwards
|
|
Derivative (Loss) Gain Recognized in OCI (Effective Portion)
|
|
$
|
(293
|
)
|
|
$
|
(2,309
|
)
|
|
$
|
1,865
|
|
|
$
|
(4,983
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Derivative Loss
Reclassified from AOCI
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
into Income (Effective Portion)
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Foreign exchange contracts Forwards
|
|
Selling, general and administrative expenses
|
|
$
|
(572
|
)
|
|
$
|
(1,045
|
)
|
|
$
|
(2,565
|
)
|
|
$
|
(2,196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys estimated net amount of the existing gains as at September 30, 2016 is
$0.1 million, which is expected to be reclassified to earnings within the next twelve months
|
(e)
|
Investments in New Business Ventures
|
The Company accounts for investments in new business ventures using the guidance of the FASB ASC 323 or
FASB ASC 320, as appropriate. As at September 30, 2016, the equity method of accounting is being utilized for an investment with a carrying value of $nil (December 31, 2015 $1.0 million). The Companys accumulated
losses in excess of its equity investment were $1.4 million as at September 30, 2016, and are classified in Accrued and other liabilities. For the three months ended September 30, 2016, gross revenues, cost of revenue and net loss for the
Companys investments were $nil, $1.6 million and $1.5 million, respectively (2015 $nil, $1.9 million and $1.8 million, respectively). For the nine months ended September 30, 2016, gross revenues, cost of
revenue and net loss for the Companys investments were $0.3 million, $6.0 million and $5.6 million, respectively (2015 $nil, $6.4 million and $6.2 million, respectively). The Company has determined it is not the
primary beneficiary of this VIE, and therefore this entity has not been consolidated. In the third quarter of 2016, the Company issued a convertible loan of $1.0 million to this entity with a term of 3 years with an annual effective interest rate of
5.0%. The instrument is classified as an available-for-sale investment due to certain features that allow for conversion to common stock in the entity in the event of certain triggers occurring. In addition, the Company has an investment in
preferred stock of another business venture of $1.5 million which meets the criteria for classification as a debt security under the FASB ASC 320 and is recorded at a fair value of $nil at September 30, 2016 (December 31, 2015
$nil). This investment was classified as an available-for-sale investment. Furthermore, the Company has an investment of $1.0 million (December 31, 2015 $1.0 million) in the shares of an exchange traded fund. This investment is also
classified as an available-for-sale investment. The Company has an investment of $2.5 million in the preferred shares of an enterprise which meet the criteria for classification as an equity security under FASB ASC 325. In the three and nine months
ended September 30, 2016, respectively, the Company recognized an other-than-temporary impairment of $nil and $0.2 million in the condensed consolidated statements of operations (2015 $nil and $0.4 million, respectively). The total
carrying value of investments in new business ventures at September 30, 2016 is $1.0 million (December 31, 2015 $2.2 million) and is recorded in Other assets.
42
16.
|
Non-Controlling Interests
|
|
(a)
|
IMAX China Non-Controlling Interest
|
On April 8, 2014, the Company announced sale and issuance of 20% of the shares of IMAX China to entities owned and
controlled by CMC Capital Partners (CMC), an investment fund that is focused on media and entertainment, and FountainVest Partners (FountainVest), a China-focused private equity firm. The sale price for the interest was $80.0
million, and was paid by the investors in two equal installments on April 8, 2014 and February 10, 2015.
On
October 8, 2015, IMAX China completed the IMAX China IPO. Following the IMAX China IPO, the Company continues to indirectly own approximately 68.5% of IMAX China, which remains a consolidated subsidiary of the Company.
The following summarizes the movement of the non-controlling interest in shareholders equity, in the Companys
subsidiary for the nine months ended September 30, 2016:
|
|
|
|
|
Balance as at December 31, 2015
|
|
$
|
49,959
|
|
Net income
|
|
|
8,015
|
|
Other comprehensive loss
|
|
|
(1,415
|
)
|
|
|
|
|
|
Balance as at September 30, 2016
|
|
$
|
56,559
|
|
|
|
|
|
|
|
(b)
|
Other Non-Controlling Interest
|
In 2014, the Company announced the creation of the Film Fund to co-finance a portfolio of 10 original large-format films. The
Film Fund, which is intended to be capitalized with up to $50.0 million, will finance an ongoing supply of original films that the Company believes will be more exciting and compelling than traditional documentaries. The initial investment in the
Film Fund was committed to by a third party in the amount of $25.0 million, with the possibility of contributing additional funds. The Company, which will contribute $9.0 million to the Film Fund over five years starting in 2014, anticipates the
Film Fund will be self-perpetuating, with a portion of box office proceeds reinvested into the Film Fund to generate a continuous, steady flow of high-quality documentary content. To date, the Film Fund invested $7.7 million toward the development
of original films. The related production, financing and distribution agreement includes put and call rights relating to change of control of the rights, title and interest in the co-financed pictures.
The following summarizes the movement of the non-controlling interest in temporary equity, in the Companys subsidiary
for the nine months ended September 30, 2016:
|
|
|
|
|
Balance as at December 31, 2015
|
|
$
|
3,307
|
|
Net loss
|
|
|
(614
|
)
|
|
|
|
|
|
Balance as at September 30, 2016
|
|
$
|
2,693
|
|
|
|
|
|
|
43
IMAX CORPORATION