IMAX CORP [IMAX] Filings

10-Q 1 imax-20220331.htm 10-Q 10-Q

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 March 31, 2022

☐ 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 March 31, 2022
Common Shares, no par value		58,750,922

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	43
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	67
Item 4.	Controls and Procedures	68

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	69
Item 1A.	Risk Factors	69
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71
Item 6.	Exhibits	72
Signatures		73

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 March 31, 2022 and December 31, 2021	4
Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021	5
Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2022 and 2021	6
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021	7
Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2022 and 2021	8
Notes to Condensed Consolidated Financial Statements	9

IMAX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)


	March 31,			December 31,
	2022			2021
Assets
Cash and cash equivalents	$	162,300		$	189,711
Accounts receivable, net of allowance for credit losses		110,478			110,050
Financing receivables, net of allowance for credit losses		131,510			141,049
Variable consideration receivables, net of allowance for credit losses		44,032			44,218
Inventories		27,332			26,924
Prepaid expenses		13,628			11,802
Film assets, net of accumulated amortization		5,518			4,241
Property, plant and equipment, net of accumulated depreciation		258,971			260,353
Investment in equity securities		1,092			1,087
Other assets		22,115			17,799
Deferred income tax assets, net of valuation allowance		13,935			13,906
Goodwill		39,027			39,027
Other intangible assets, net of accumulated amortization		22,110			23,080
Total assets	$	852,048		$	883,247
Liabilities
Accounts payable	$	18,220		$	15,943
Accrued and other liabilities		96,551			111,896
Deferred revenue		80,463			81,281
Revolving credit facility borrowings, net of unamortized debt issuance costs		1,080			2,472
Convertible notes, net of unamortized discounts and debt issuance costs		224,010			223,641
Deferred income tax liabilities		17,642			17,642
Total liabilities		437,966			452,875
Commitments and contingencies (see Note 8)
Non-controlling interests		761			758
Shareholders' equity
Capital stock common shares — no par value. Authorized — unlimited number.
58,750,922 issued and outstanding (December 31, 2021 — 58,653,642 issued and outstanding)		415,362			409,979
Other equity		167,912			174,620
Statutory surplus reserve		3,932			3,932
Accumulated deficit		(251,194	)		(234,975	)
Accumulated other comprehensive income		3,228			2,527
Total shareholders' equity attributable to common shareholders		339,240			356,083
Non-controlling interests		74,081			73,531
Total shareholders' equity		413,321			429,614
Total liabilities and shareholders' equity	$	852,048		$	883,247

(See the accompanying notes, which 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
	March 31,
	2022			2021
Revenues
Technology sales	$	8,976		$	6,175
Image enhancement and maintenance services		36,094			21,615
Technology rentals		12,661			8,359
Finance income		2,305			2,605
		60,036			38,754
Costs and expenses applicable to revenues
Technology sales		5,985			5,053
Image enhancement and maintenance services		15,743			9,764
Technology rentals		6,537			6,656
		28,265			21,473
Gross margin		31,771			17,281
Selling, general and administrative expenses		30,181			25,209
Research and development		1,196			1,471
Amortization of intangible assets		1,197			1,141
Credit loss expense, net		7,229			305
Loss from operations		(8,032	)		(10,845	)
Realized and unrealized investment gains		34			5,248
Retirement benefits non-service expense		(139	)		(114	)
Interest income		502			583
Interest expense		(1,705	)		(2,304	)
Loss before taxes		(9,340	)		(7,432	)
Income tax expense		(2,610	)		(3,068	)
Net loss		(11,950	)		(10,500	)
Less: Net income attributable to non-controlling interests		(1,659	)		(4,340	)
Net loss attributable to common shareholders	$	(13,609	)	$	(14,840	)

Net loss per share attributable to common shareholders - basic and diluted:
Net loss per share — basic and diluted	$	(0.23	)	$	(0.25	)

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

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands of U.S. Dollars)

(Unaudited)


	Three Months Ended
	March 31,
	2022			2021
Net loss	$	(11,950	)	$	(10,500	)
Other comprehensive income (loss), before tax
Unrealized net gain from cash flow hedging instruments		315			295
Realized net loss (gain) from cash flow hedging instruments		29			(231	)
Reclassification of unrealized gain from ineffective cash flow hedging instruments		—			(22	)
Foreign currency translation adjustments		580			(2,166	)
Defined benefit and postretirement benefit plans		46			48
Total other comprehensive income (loss), before tax		970			(2,076	)
Income tax expense related to other comprehensive income (loss)		(102	)		(24	)
Other comprehensive income (loss), net of tax		868			(2,100	)
Comprehensive loss		(11,082	)		(12,600	)
Comprehensive income attributable to non-controlling interests		(1,826	)		(3,687	)
Comprehensive loss attributable to common shareholders	$	(12,908	)	$	(16,287	)

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

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. Dollars)

(Unaudited)


	Three Months Ended
	March 31,
	2022			2021
Operating Activities
Net loss	$	(11,950	)	$	(10,500	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		12,741			12,678
Amortization of deferred financing costs		1,023			308
Credit loss expense, net		7,229			305
Write-downs		381			213
Deferred income tax (benefit) expense		(109	)		158
Share-based and other non-cash compensation		6,189			5,421
Unrealized foreign currency exchange loss		58			113
Realized and unrealized investment gains		(34	)		(5,248	)
Changes in assets and liabilities:
Accounts receivable		(2,654	)		(13,744	)
Inventories		(534	)		437
Film assets		(5,107	)		(2,213	)
Deferred revenue		(830	)		5,276
Changes in other operating assets and liabilities		(10,186	)		(4,155	)
Net cash used in operating activities		(3,783	)		(10,951	)
Investing Activities
Purchase of property, plant and equipment		(728	)		(466	)
Investment in equipment for joint revenue sharing arrangements		(4,587	)		(1,540	)
Interest in film classified as a financial instrument		(4,731	)		—
Acquisition of other intangible assets		(551	)		(1,507	)
Proceeds from sale of equity securities		—			17,769
Net cash (used in) provided by investing activities		(10,597	)		14,256
Financing Activities
Proceeds from issuance of convertible notes, net		—			223,675
Purchase of capped calls related to convertible notes		—			(19,067	)
Repayments of revolving credit facility borrowings		—			(255,000	)
Credit facility amendment fees paid		(1,783	)		(32	)
Repurchase of common shares, IMAX Corporation		(6,272	)		—
Repurchase of common shares, IMAX China		(1,844	)		—
Taxes withheld and paid on employee stock awards vested		(3,136	)		(3,045	)
Common shares issued - stock options exercised		—			824
Net cash used in financing activities		(13,035	)		(52,645	)
Effects of exchange rate changes on cash and cash equivalents		4			(245	)
Decrease in cash and cash equivalents during period		(27,411	)		(49,585	)
Cash and cash equivalents, beginning of period		189,711			317,379
Cash and cash equivalents, end of period	$	162,300		$	267,794

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

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands of U.S. Dollars)

(Unaudited)


	Three Months Ended
	March 31,
	2022			2021
Adjustments to capital stock:
Balance, beginning of period	$	409,979		$	407,020
Employee stock options exercised, net of shares withheld for employee tax obligations		—			824
Grant date fair value of stock options exercised		—			253
Average carrying value of repurchased and retired common shares		(3,662	)		—
Restricted share units vested		9,045			6,885
Balance, end of period		415,362			414,982
Adjustments to other equity:
Balance, beginning of period		174,620			188,845
Amortization of share-based payment expense - stock options		231			391
Amortization of share-based payment expense - restricted share units		4,350			3,486
Amortization of share-based payment expense - performance stock units		1,854			1,087
Restricted share units vested		(12,600	)		(10,318	)
Grant date fair value of stock options exercised		—			(253	)
Change in ownership interest related to IMAX China common share repurchases		(543	)		—
Purchase of capped calls related to convertible notes		—			(19,067	)
Balance, end of period		167,912			164,171
Adjustments to statutory surplus reserve:
Balance, beginning of period		3,932			—
Balance, end of period		3,932			—
Adjustments to accumulated defi

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