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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 September 30, 2023

OR

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

For the transition period from to

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

 

 

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 September 30, 2023

Common Shares, no par value

 

54,607,095

 

 

 

 


 

 

IMAX CORPORATION

 

Table of Contents

 

 

 

Page

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements

3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

45

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

72

Item 4.

Controls and Procedures

74

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

75

Item 1A.

Risk Factors

75

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

76

Item 5.

Other Information

77

Item 6.

Exhibits

78

Signatures

 

79

 

2


 

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 of September 30, 2023 and December 31, 2022

4

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022

5

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2023 and 2022

6

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022

7

Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2023 and 2022

8

Notes to Condensed Consolidated Financial Statements

9

 

3


 

IMAX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

109,603

 

 

$

97,401

 

Accounts receivable, net of allowance for credit losses

 

 

135,962

 

 

 

136,142

 

Financing receivables, net of allowance for credit losses

 

 

125,322

 

 

 

129,384

 

Variable consideration receivables, net of allowance for credit losses

 

 

59,042

 

 

 

44,024

 

Inventories

 

 

45,365

 

 

 

31,534

 

Prepaid expenses

 

 

13,042

 

 

 

12,343

 

Film assets, net of accumulated amortization

 

 

5,232

 

 

 

5,277

 

Property, plant and equipment, net of accumulated depreciation

 

 

238,140

 

 

 

252,896

 

Investment in equity securities

 

 

 

 

 

1,035

 

Other assets

 

 

20,119

 

 

 

15,665

 

Deferred income tax assets, net of valuation allowance

 

 

11,961

 

 

 

9,900

 

Goodwill

 

 

52,815

 

 

 

52,815

 

Other intangible assets, net of accumulated amortization

 

 

34,343

 

 

 

32,738

 

Total assets

 

$

850,946

 

 

$

821,154

 

Liabilities

 

 

 

 

 

 

Accounts payable

 

$

37,699

 

 

$

25,237

 

Accrued and other liabilities

 

 

123,863

 

 

 

117,286

 

Deferred revenue

 

 

66,272

 

 

 

70,940

 

Revolving credit facility borrowings, net of unamortized debt issuance costs

 

 

23,903

 

 

 

36,111

 

Convertible notes and other borrowings, net of unamortized discounts and debt issuance costs

 

 

228,449

 

 

 

226,912

 

Deferred income tax liabilities

 

 

13,349

 

 

 

14,900

 

Total liabilities

 

 

493,535

 

 

 

491,386

 

Commitments, contingencies and guarantees (see Note 7)

 

 

 

 

 

 

Non-controlling interests

 

 

661

 

 

 

722

 

Shareholders' equity

 

 

 

 

 

 

Capital stock common shares — no par value. Authorized — unlimited number.

 

 

 

 

 

 

54,607,095 issued and outstanding (December 31, 2022 — 54,148,614 issued and outstanding)

 

 

390,097

 

 

 

376,715

 

Other equity

 

 

179,970

 

 

 

185,678

 

Statutory surplus reserve

 

 

3,932

 

 

 

3,932

 

Accumulated deficit

 

 

(272,318

)

 

 

(293,124

)

Accumulated other comprehensive loss

 

 

(14,637

)

 

 

(9,846

)

Total shareholders' equity attributable to common shareholders

 

 

287,044

 

 

 

263,355

 

Non-controlling interests

 

 

69,706

 

 

 

65,691

 

Total shareholders' equity

 

 

356,750

 

 

 

329,046

 

Total liabilities and shareholders' equity

 

$

850,946

 

 

$

821,154

 

 

(See the accompanying notes, which are an integral part of these Condensed Consolidated Financial Statements.)

4


 

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Technology sales

 

$

18,273

 

 

$

18,065

 

 

$

65,455

 

 

$

35,270

 

Image enhancement and maintenance services

 

 

60,250

 

 

 

36,233

 

 

 

154,244

 

 

 

117,285

 

Technology rentals

 

 

23,008

 

 

 

12,540

 

 

 

62,612

 

 

 

43,726

 

Finance income

 

 

2,365

 

 

 

1,917

 

 

 

6,510

 

 

 

6,478

 

 

 

103,896

 

 

 

68,755

 

 

 

288,821

 

 

 

202,759

 

Costs and expenses applicable to revenues

 

 

 

 

 

 

 

 

 

 

 

 

Technology sales

 

 

7,948

 

 

 

10,061

 

 

 

28,951

 

 

 

20,264

 

Image enhancement and maintenance services

 

 

26,646

 

 

 

20,563

 

 

 

69,470

 

 

 

56,259

 

Technology rentals

 

 

6,587

 

 

 

6,430

 

 

 

19,747

 

 

 

18,728

 

 

 

41,181

 

 

 

37,054

 

 

 

118,168

 

 

 

95,251

 

Gross margin

 

 

62,715

 

 

 

31,701

 

 

 

170,653

 

 

 

107,508

 

Selling, general and administrative expenses

 

 

36,282

 

 

 

32,905

 

 

 

109,336

 

 

 

100,181

 

Research and development

 

 

2,771

 

 

 

1,115

 

 

 

7,388

 

 

 

3,667

 

Amortization of intangible assets

 

 

1,107

 

 

 

1,111

 

 

 

3,328

 

 

 

3,412

 

Credit loss expense, net

 

 

523

 

 

 

808

 

 

 

1,589

 

 

 

8,149

 

Asset impairments

 

 

 

 

 

 

 

 

 

 

 

4,470

 

Executive transition costs

 

 

 

 

 

 

 

 

1,353

 

 

 

 

Income (loss) from operations

 

 

22,032

 

 

 

(4,238

)

 

 

47,659

 

 

 

(12,371

)

Unrealized investment gains

 

 

364

 

 

 

35

 

 

 

436

 

 

 

99

 

Retirement benefits non-service expense

 

 

(77

)

 

 

(140

)

 

 

(232

)

 

 

(417

)

Interest income

 

 

738

 

 

 

257

 

 

 

1,838

 

 

 

1,176

 

Interest expense

 

 

(1,483

)

 

 

(1,323

)

 

 

(5,045

)

 

 

(4,354

)

Income (loss) before taxes

 

 

21,574

 

 

 

(5,409

)

 

 

44,656

 

 

 

(15,867

)

Income tax expense

 

 

(6,555

)

 

 

(2,348

)

 

 

(14,901

)

 

 

(8,091

)

Net income (loss)

 

 

15,019

 

 

 

(7,757

)

 

 

29,755

 

 

 

(23,958

)

Less: net income attributable to non-controlling interests

 

 

(3,029

)

 

 

(1,196

)

 

 

(6,960

)

 

 

(1,455

)

Net income (loss) attributable to common shareholders

 

$

11,990

 

 

$

(8,953

)

 

$

22,795

 

 

$

(25,413

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to common shareholders:

 

Basic

 

$

0.22

 

 

$

(0.16

)

 

$

0.42

 

 

$

(0.44

)

Diluted

 

$

0.22

 

 

$

(0.16

)

 

$

0.41

 

 

$

(0.44

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

54,618

 

 

 

56,039

 

 

 

54,424

 

 

 

57,301

 

Diluted

 

 

55,535

 

 

 

56,039

 

 

 

55,261

 

 

 

57,301

 

 

(See the accompanying notes, which are an integral part of these Condensed Consolidated Financial Statements.)

5


 

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands of U.S. Dollars)

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income (loss)

 

$

15,019

 

 

$

(7,757

)

 

$

29,755

 

 

$

(23,958

)

Other comprehensive (loss) income, before tax

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized net loss from cash flow hedging instruments

 

 

(1,048

)

 

 

(1,567

)

 

 

(226

)

 

 

(1,862

)

Realized net loss from cash flow hedging instruments

 

 

174

 

 

 

80

 

 

 

636

 

 

 

175

 

Foreign currency translation adjustments

 

 

1,060

 

 

 

(11,703

)

 

 

(6,559

)

 

 

(24,644

)

Defined benefit and postretirement benefit plans

 

 

(176

)

 

 

46

 

 

 

(528

)

 

 

138

 

Total other comprehensive loss, before tax

 

 

10

 

 

 

(13,144

)

 

 

(6,677

)

 

 

(26,193

)

Income tax benefit related to other comprehensive (loss) income

 

 

274

 

 

 

380

 

 

 

30

 

 

 

408

 

Other comprehensive income (loss), net of tax

 

 

284

 

 

 

(12,764

)

 

 

(6,647

)

 

 

(25,785

)

Comprehensive income (loss) attributable to common shareholders

 

 

15,303

 

 

 

(20,521

)

 

 

23,108

 

 

 

(49,743

)

Comprehensive (income) loss attributable to non-controlling interests

 

 

(3,328

)

 

 

2,150

 

 

 

(5,104

)

 

 

5,630

 

Comprehensive income (loss) attributable to common shareholders

 

$

11,975

 

 

$

(18,371

)

 

$

18,004

 

 

$

(44,113

)

 

(See the accompanying notes, which are an integral part of these Condensed Consolidated Financial Statements.)

6


 

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. Dollars)

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2023

 

 

2022

 

Operating Activities

 

 

 

 

 

 

Net income (loss)

 

$

29,755

 

 

$

(23,958

)

Adjustments to reconcile net income (loss) to cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

46,477

 

 

 

42,663

 

Amortization of deferred financing costs

 

 

1,742

 

 

 

2,465

 

Credit loss expense, net

 

 

1,589

 

 

 

8,149

 

Write-downs

 

 

872

 

 

 

5,707

 

Deferred income tax benefit

 

 

(3,724

)

 

 

(3,374

)

Share-based and other non-cash compensation

 

 

17,830

 

 

 

19,510

 

Unrealized foreign currency exchange loss

 

 

52

 

 

 

1,310

 

Unrealized investment gains

 

 

(436

)

 

 

(99

)

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(2,392

)

 

 

(18,050

)

Inventories

 

 

(13,771

)

 

 

(10,131

)

Film assets

 

 

(14,575

)

 

 

(14,174

)

Deferred revenue

 

 

(4,670

)

 

 

(5,989

)

Changes in other operating assets and liabilities

 

 

(4,141

)

 

 

(3,548

)

Net cash provided by operating activities

 

 

54,608

 

 

 

481

 

Investing Activities

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(2,541

)

 

 

(5,248

)

Investment in equipment for joint revenue sharing arrangements

 

 

(10,705

)

 

 

(14,543

)

Interest in film classified as a financial instrument

 

 

 

 

 

(4,731

)

Acquisition of other intangible assets

 

 

(5,418

)

 

 

(3,246

)

Acquisition of SSIMWAVE, net of cash and cash equivalents acquired

 

 

 

 

 

(12,639

)

Net cash used in investing activities

 

 

(18,664

)

 

 

(40,407

)

Financing Activities

 

 

 

 

 

 

Revolving credit facility borrowings

 

 

31,032

 

 

 

4,890

 

Repayments of revolving credit facility borrowings

 

 

(43,057

)

 

 

(3,600

)

Credit facility amendment fees paid

 

 

 

 

 

(2,277

)

Other borrowings

 

 

315

 

 

 

 

Repurchase of common shares

 

 

(4,263

)