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Financial Instruments | 9 Months Ended
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Sep. 30, 2021
Investments All Other Investments [Abstract] |
Financial Instruments | 16. Financial Instruments
| (a) | Financial Instruments
The Company maintains cash with various major financial institutions. The Company’s cash is invested with highly rated financial institutions. The Company’s $193.0 million balance of cash and cash equivalents as of September 30, 2021 includes $101.0 million in cash held outside of Canada (December 31, 2020 — $89.9 million), of which $70.3 million was held in the PRC (December 31, 2020 — $77.2 million).
| (b) | Fair Value Measurements
The carrying values of the Company’s Cash and Cash Equivalents, Accounts Receivable, Accounts Payable and Accrued Liabilities due within one year approximate their fair values due to the short-term maturity of these instruments. Including these instruments, the Company’s financial instruments consist of the following:
|  | As of September 30, 2021 |  |  | As of December 31, 2020 |
(In thousands of U.S. Dollars) |  | Carrying Amount |  |  | Estimated Fair Value |  |  | Carrying Amount |  |  | Estimated Fair Value |
Level 1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents(1) |  | $ | 193,008 |  |  | $ | 193,008 |  |  | $ | 317,379 |  |  | $ | 317,379 |
Equity securities(2) |  |  | 1,089 |  |  |  | 1,089 |  |  |  | 13,633 |  |  |  | 13,633 |
Level 2 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net financed sales receivables(3) |  | $ | 113,200 |  |  | $ | 113,210 |  |  | $ | 112,396 |  |  | $ | 112,603 |
Net investment in sales-type leases(3) |  |  | 22,002 |  |  |  | 21,850 |  |  |  | 19,414 |  |  |  | 19,373 |
Equity securities(1) |  |  | 1,000 |  |  |  | 1,000 |  |  |  | 1,000 |  |  |  | 1,000 |
COLI(4) |  |  | 3,244 |  |  |  | 3,244 |  |  |  | 3,155 |  |  |  | 3,155 |
Foreign exchange contracts — designated forwards(3) |  |  | (209 | ) |  |  | (209 | ) |  |  | 1,635 |  |  |  | 1,635 |
Foreign exchange contracts — non-designated forwards(3) |  |  | (61 | ) |  |  | (61 | ) |  |  | 344 |  |  |  | 344 |
Working Capital Facility borrowings(1) |  |  | (10,974 | ) |  |  | (10,974 | ) |  |  | (7,643 | ) |  |  | (7,643 | )
Credit Facility borrowings(1) |  |  | — |  |  |  | — |  |  |  | (300,000 | ) |  |  | (300,000 | )
Convertible Notes(5) |  |  | (230,000 | ) |  |  | (224,574 | ) |  |  | — |  |  |  | — |
(1) | Recorded at cost, which approximates fair value.
(2) | Fair value is determined using quoted prices in active markets.
(3) | Fair value is estimated based on discounting future cash flows at currently available interest rates with comparable terms.
(4) | Measured at cash surrender value, which approximates fair value.
(5) | Fair value is determined using quoted market prices that are observable in the market or that could be derived from observable market data.
The Company did not have any material amounts of Level 3 assets or liabilities as of September 30, 2021 and December 31, 2020.
| (c) | Foreign Exchange Risk Management
The Company is exposed to market risk from changes in foreign currency rates. A majority of the Company’s 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 RMB 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 RMB, Japanese Yen, Canadian Dollars and Euros which are converted to U.S. Dollars through the spot market. In addition, because IMAX films generate box office in 85 different countries, unfavourable exchange rates between applicable local currencies and the U.S. Dollar affect the Company’s reported gross box-office receipts and revenues, further impacting the Company’s results of operations. The Company’s policy is to not use any financial instruments for trading or other speculative purposes. The Company has entered into a series of foreign currency forward contracts to manage the 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, 2021 (the “Foreign Currency Hedges”), with settlement dates throughout 2022. Foreign currency derivatives are recognized and measured in the Condensed Consolidated Balance Sheets at fair value. Changes in the fair value (i.e., gains or losses) are recognized in the Condensed Consolidated Statements of Operations except for derivatives designated and qualifying as foreign currency cash flow hedging instruments. The Company currently has cash flow hedging instruments associated with Selling, General and Administrative Expenses. For foreign currency cash flow hedging instruments related to Selling, General and Administrative Expenses, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported in Other Comprehensive (Loss) Income and reclassified to the Condensed Consolidated Statements of Operations when the forecasted transaction occurs. For foreign currency cash flow hedging instruments related to Inventories, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported in Other Comprehensive (Loss) Income and reclassified to Inventories in the Condensed Consolidated Balance Sheets when the forecasted transaction occurs. Any ineffective portion is recognized immediately in the Condensed Consolidated Statements of Operations. The following tabular disclosures reflect the impact that derivative instruments and hedging activities have on the Company’s Condensed Consolidated Financial Statements: Notional value of foreign exchange contracts:
|  | September 30, |  |  | December 31, |
(In thousands of U.S. Dollars) |  | 2021 |  |  | 2020 |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |
Foreign exchange contracts — Forwards |  | $ | 24,642 |  |  | $ | 26,358 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |
Foreign exchange contracts — Forwards |  |  | 1,123 |  |  |  | 5,552 |
|  | $ | 25,765 |  |  | $ | 31,910 |
Fair value of derivatives in foreign exchange contracts:
|  |  |  | September 30, |  |  | December 31, |
(In thousands of U.S. Dollars) |  | Balance Sheet Location |  | 2021 |  |  | 2020 |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts — Forwards |  | Other assets |  | $ | 128 |  |  | $ | 1,635 |
|  | Accrued and other liabilities |  |  | (337 | ) |  |  | — |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |
Foreign exchange contracts — Forwards |  | Other assets |  |  | — |  |  |  | 344 |
|  | Accrued and other liabilities |  |  | (61 | ) |  |  | — |
|  |  |  | $ | (270 | ) |  | $ | 1,979 |
Derivatives in foreign currency hedging relationships are as follows:
|  |  |  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(In thousands of U.S. Dollars) |  |  |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Foreign exchange contracts |  | Derivative (Loss) Gain |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
— Forwards |  | Recognized in OCI |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | (Effective Portion) |  | $ | (759 | ) |  | $ | 591 |  |  | $ | (159 | ) |  | $ | (935 | )
|  | Location of Derivative Gain (Loss) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Reclassified from AOCI |  | Three Months Ended September 30, |  |  | Nine months ended September 30, |
(In thousands of U.S. Dollars) |  | (Effective Portion) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Foreign exchange contracts |  | Selling, general and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
— Forwards |  | administrative expenses |  | $ | 312 |  |  | $ | (110 | ) |  | $ | 1,367 |  |  |  | (779 | )
|  | Inventory |  |  | — |  |  |  | — |  |  | $ | — |  |  |  | (26 | )
|  |  |  | $ | 312 |  |  | $ | (110 | ) |  | $ | 1,367 |  |  | $ | (805 | )
|  |  |  | Three Months Ended September 30, |  |  | Nine months ended September 30, |
(In thousands of U.S. Dollars) |  |  |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Foreign exchange contracts |  | Derivative Loss Recognized In |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
— Forwards |  | and Out of OCI |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | (Effective Portion) |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (55 | )
The Company's estimated net amount of the existing loss as of September 30, 2021 is $0.2 million, which is expected to be reclassified to earnings within the next twelve months. Non-designated derivatives in foreign currency relationships are as follows:
|  |  |  | Three Months Ended September 30, |  |  | Nine months ended September 30, |
(In thousands of U.S. Dollars) |  |  |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Foreign exchange contracts |  | Derivative Gain Reclassified |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
— Forwards |  | From AOCI |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | (Ineffective Portion) |  | $ | (25 | ) |  | $ | — |  |  | $ | (318 | ) |  | $ | — |
|  |  |  | Three Months Ended September 30, |  |  | Nine months ended September 30, |
(In thousands of U.S. Dollars) |  | Location of Derivative (Loss) Gain |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Foreign exchange contracts |  | Selling, general and |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
— Forwards |  | administrative expenses |  | $ | (122 | ) |  | $ | 75 |  |  | $ | 269 |  |  | $ | 102 |
|  |  |  | $ | (122 | ) |  | $ | 75 |  |  | $ | 269 |  |  | $ | 102 |
| (d) | Investments in Equity Securities
As of September 30, 2021, the Condensed Consolidated Balance Sheets includes $1.1 million (December 31, 2020 — $13.6 million) of investments in equity securities. On January 17, 2019, IMAX China (Hong Kong), Limited, a wholly-owned subsidiary of IMAX China, as an investor entered into a cornerstone investment agreement with Maoyan Entertainment (“Maoyan”) (as the issuer) and Morgan Stanley Asia Limited (as a sponsor, underwriter and the underwriters’ representative). Pursuant to this agreement, IMAX China (Hong Kong), Limited agreed to invest $15.2 million to subscribe for a certain number of shares of Maoyan at the final offer price pursuant to the global offering of the share capital of Maoyan, and this investment would be subject to a lock-up period of six months following the date of the global offering. On February 4, 2019, Maoyan completed its global offering, upon which, IMAX China (Hong Kong), Limited became a less than 1% shareholder in Maoyan. In February 2021, IMAX China (Hong Kong), Limited sold all of its 7,949,000 shares of Maoyan for gross proceeds of $17.8 million, which represents a $2.6 million gain relative to the Company’s acquisition cost and a $5.2 million gain compared to the fair value of the investment as of December 31, 2020. Prior to this sale, the Company accounted for its investment in Maoyan at fair value with any changes in fair value recorded to the Condensed Consolidated Statements of Operations. For the three and nine months ended September 30, 2020, the fair value of the Company’s investment in Maoyan experienced an unrealized gain of $1.6 million and loss of $(0.9) million, respectively. As of December 31, 2020, the value of the Company’s investment in Maoyan was $12.6 million. The Company has an investment of $1.1 million (December 31, 2020 — $1.1 million) in the shares of an exchange traded fund. This investment is classified as an equity investment. As of September 30, 2021, the Company held investments in the preferred shares of enterprises which meet the criteria for classification as an equity security under FASB ASC 321, carried at historical cost, net of impairment charges. The carrying value of these equity security investments was $1.0 million at September 30, 2021 (December 31, 2020 — $1.0 million) and is recorded in Other Assets.

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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