IMAX Earnings 2019-06-30

IMAX 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

imax-10q_20190630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-35066

IMAX Corporation

(Exact name of registrant as specified in its charter)

Canada	98-0140269
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

2525 Speakman Drive, Mississauga, Ontario, Canada L5K 1B1 (905) 403-6500	902 Broadway, Floor 20 New York, New York, USA 10010 (212) 821-0100

(Address of principal executive offices, zip code, telephone numbers)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Shares, no par value		IMAX		The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class		Outstanding as of June 30, 2019
Common Shares, no par value		61,331,289

IMAX CORPORATION

Table of Contents


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	70
Item 4.	Controls and Procedures	71

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	72
Item 1A.	Risk Factors	72
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72
Item 6.	Exhibits	73
Signatures		74

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

Certain statements included in this quarterly report may constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, references to future capital expenditures (including the amount and nature thereof), business and technology strategies and measures to implement strategies, competitive strengths, goals, expansion and growth of business, operations and technology, plans and references to the future success of IMAX Corporation together with its consolidated subsidiaries (the "Company") and expectations regarding the Company's future operating, financial and technological results. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. However, whether actual results and developments will conform with the expectations and predictions of the Company is subject to a number of risks and uncertainties, including, but not limited to, risks associated with investments and operations in foreign jurisdictions and any future international expansion, including those related to economic, political and regulatory policies of local governments and laws and policies of the United States and Canada; risks related to the Company’s growth and operations in China; the performance of IMAX DMR films; the signing of theater system agreements; conditions, changes and developments in the commercial exhibition industry; risks related to currency fluctuations; the potential impact of increased competition in the markets within which the Company operates; competitive actions by other companies; the failure to respond to change and advancements in digital technology; risks relating to recent consolidation among commercial exhibitors and studios; risks related to new business initiatives; conditions in the in-home and out-of-home entertainment industries; the opportunities (or lack thereof) that may be presented to and pursued by the Company; risks related to cyber-security and data privacy; risks related to the Company’s inability to protect the Company’s intellectual property; general economic, market or business conditions; the failure to convert theater system backlog into revenue; changes in laws or regulations; the failure to fully realize the projected cost savings and benefits from any of the Company’s restructuring initiatives; and other factors, many of which are beyond the control of the Company. Consequently, all of the forward-looking statements made in this quarterly report are qualified by these cautionary statements, and actual results or anticipated developments by the Company may not be realized, and even if substantially realized, may not have the expected consequences to, or effects on, the Company. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking information, whether as a result of new information, future events or otherwise.

IMAX^®, IMAX^® Dome, IMAX^® 3D, IMAX^® 3D Dome, Experience It In IMAX^®, The IMAX Experience^®, An IMAX Experience^®, An IMAX 3D Experience^®, IMAX DMR^®, DMR^®, IMAX nXos^®, IMAX think big^®, think big^® and IMAX Is Believing^®, are trademarks and trade names of the Company or its subsidiaries that are registered or otherwise protected under laws of various jurisdictions.

IMAX CORPORATION

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


	Page
The following unaudited Condensed Consolidated Financial Statements are filed as part of this Report:

Condensed Consolidated Balance Sheets as at June 30, 2019 and December 31, 2018	5
Condensed Consolidated Statements of Operations for the three and six month periods ended June 30, 2019 and 2018	6
Condensed Consolidated Statements of Comprehensive Income for the three and six month periods ended June 30, 2019 and 2018	7
Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2019 and 2018	8
Condensed Consolidated Statements of Shareholders’ Equity for the three and six month periods ended June 30, 2019 and 2018	9
Notes to Condensed Consolidated Financial Statements	10

IMAX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars)

(Unaudited)

	June 30,			December 31,
	2019			2018
Assets
Cash and cash equivalents	$	106,451		$	141,590
Accounts receivable, net of allowance for doubtful accounts of $4,641 (December 31, 2018 — $3,174)		91,490			93,309
Financing receivables, net of allowance for uncollectible amounts		121,649			127,432
Variable consideration receivable from contracts		36,347			35,985
Inventories		47,976			44,560
Prepaid expenses		11,447			10,294
Film assets		17,266			16,367
Property, plant and equipment		308,326			280,658
Investment in equity securities		14,149			1,022
Other assets		19,946			17,997
Deferred income taxes		29,638			31,264
Other intangible assets		32,176			34,095
Goodwill		39,027			39,027
Total assets	$	875,888		$	873,600
Liabilities
Bank indebtedness	$	22,976		$	37,753
Accounts payable		22,155			32,057
Accrued and other liabilities		114,150			97,724
Deferred revenue		105,384			106,709
Total liabilities		264,665			274,243
Commitments and contingencies
Non-controlling interests		7,172			6,439
Shareholders' equity
Capital stock common shares — no par value. Authorized — unlimited number.
61,432,275 issued and 61,331,289 outstanding (December 31, 2018 — 61,478,168 issued and 61,433,589 outstanding)		423,676			422,455
Less: Treasury stock, 77,607 shares at cost (December 31, 2018 — 44,579)		(1,575	)		(916	)
Other equity		166,232			179,595
Accumulated deficit		(66,828	)		(85,385	)
Accumulated other comprehensive loss		(2,926	)		(3,588	)
Total shareholders' equity attributable to common shareholders		518,579			512,161
Non-controlling interests		85,472			80,757
Total shareholders' equity		604,051			592,918
Total liabilities and shareholders' equity	$	875,888		$	873,600

(the accompanying notes are an integral part of these condensed consolidated financial statements)

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars, except per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Revenues
Equipment and product sales	$	19,694		$	15,368		$	34,894		$	34,881
Services		56,662			54,785			100,809			99,531
Rentals		25,863			25,124			44,033			43,326
Finance income		2,578			3,068			5,259			5,591
		104,797			98,345			184,995			183,329
Costs and expenses applicable to revenues
Equipment and product sales		11,939			7,549			21,374			15,521
Services		26,781			23,633			46,024			43,984
Rentals		6,524			6,759			12,904			12,728
		45,244			37,941			80,302			72,233
Gross margin		59,553			60,404			104,693			111,096
Selling, general and administrative expenses		32,136			32,484			59,785			60,443
Research and development		1,222			3,922			2,358			7,514
Amortization of intangibles		1,218			965			2,293			1,857
Receivable provisions, net of recoveries		927			355			1,358			806
Legal arbitration award		—			7,500			—			7,500
Exit costs, restructuring charges and associated impairments		—			456			850			1,158
Income from operations		24,050			14,722			38,049			31,818
Change in fair value of equity investment		(4,544	)		—			(2,053	)		—
Retirement benefits non-service expense		(160	)		(124	)		(320	)		(248	)
Interest income		572			243			1,142			490
Interest expense		(636	)		(851	)		(1,317	)		(1,345	)
Income before income taxes		19,282			13,990			35,501			30,715
Provision for income taxes		(5,308	)		(3,635	)		(8,956	)		(8,088	)
Loss from equity-accounted investments, net of tax		(138	)		(100	)		(222	)		(305	)
Net income		13,836			10,255			26,323			22,322
Less: net income attributable to non-controlling interests		(2,439	)		(2,630	)		(6,661	)		(6,192	)
Net income attributable to common shareholders	$	11,397		$	7,625		$	19,662		$	16,130
Net income per share attributable to common shareholders - basic and diluted:
Net income per share — basic and diluted	$	0.19		$	0.12		$	0.32		$	0.25

(the accompanying notes are an integral part of these condensed consolidated financial statements)

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of U.S. dollars)

(Unaudited)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019		2018			2019		2018
Net income	$	13,836	$	10,255		$	26,323	$	22,322
Unrealized net gain (loss) from cash flow hedging instruments		297		(679	)		365		(1,686	)
Realization of cash flow hedging net (gain) loss upon

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$20.37	61	$1,248

10-Q	2019-06-30	Quarter: 2019-06-30
10-Q	2019-03-31	Quarter: 2019-03-31
10-K	2018-12-31	Annual: 2018-12-31
10-Q	2018-09-30	Quarter: 2018-09-30
10-Q	2018-06-30	Quarter: 2018-06-30
10-Q	2018-03-31	Quarter: 2018-03-31
10-K	2017-12-31	Annual: 2017-12-31
10-Q	2017-09-30	Quarter: 2017-09-30
10-Q	2017-06-30	Quarter: 2017-06-30
10-Q	2017-03-31	Quarter: 2017-03-31
10-K	2016-12-31	Annual: 2016-12-31
10-Q	2016-09-30	Quarter: 2016-09-30
10-Q	2016-06-30	Quarter: 2016-06-30
10-Q	2016-03-31	Quarter: 2016-03-31
10-K	2015-12-31	Annual: 2015-12-31
10-Q	2015-09-30	Quarter: 2015-09-30
10-Q	2015-06-30	Quarter: 2015-06-30
10-Q	2015-03-31	Quarter: 2015-03-31
10-K	2014-12-31	Annual: 2014-12-31
10-Q	2014-09-30	Quarter: 2014-09-30
10-Q	2014-06-30	Quarter: 2014-06-30
10-Q	2014-03-31	Quarter: 2014-03-31
10-K	2013-12-31	Annual: 2013-12-31

8-K	2019-07-30	Earnings, Exhibits
8-K	2019-06-05	Shareholder Vote
8-K	2019-04-26	Earnings, Exhibits
8-K	2019-02-26	Earnings, Exhibits
8-K	2018-12-13	Regulation FD
8-K	2018-10-25	Earnings, Exhibits
8-K	2018-10-15	Other Events
8-K	2018-07-25	Earnings, Exhibits
8-K	2018-06-28	Enter Agreement, Off-BS Arrangement
8-K	2018-06-05	Shareholder Vote
8-K	2018-03-23	Officers

SWK	Stanley Black & Decker	20,196
NOVT	Novanta	2,502
CUB	Cubic	2,135
LPL	LG Display	1,964
GEOS	Geospace Technologies	162
TGEN	Tecogen	85
CPST	Capstone Turbine	49
CVR	Chicago Rivet & Machine	26
FCEL	Fuelcell Energy	9
ORBK	Orbotech	0

EX-31.1	imax-ex311_140.htm
EX-31.2	imax-ex312_141.htm
EX-32.1	imax-ex321_139.htm
EX-32.2	imax-ex322_142.htm